10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                                                           to

Commission File Number: 0-26372

CELLEGY PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	82-0429727
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

349 Oyster Point Boulevard, Suite 200, South San Francisco, California 94080

(Address of principal executive offices, including zip code)

(650) 616-2200

 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ý              No  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b under the Securities Exchange Act of 1934). Yes  o        No  ý

The number of shares outstanding of the registrant’s common stock at November 3, 2004 was 26,014,038.

CELLEGY PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

PARTI	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003
	Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2004 and 2003, and the period from June 26, 1989 (inception) to September 30, 2004
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003, and the period from June 26, 1989 (inception) to September 30, 2004
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosure of Market Risk
Item 4.	Controls and Procedures
PARTII	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits
Signatures
Certifications

PART I — FINANCIAL INFORMATION

Item 1.    Financial Statements

Cellegy Pharmaceuticals, Inc.

(a development stage company)

Condensed Consolidated Balance Sheets

(Unaudited) (Amounts in thousands)

	September 30, 2004			December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	13,359		$	7,650
Short-term investments	—			3,687
Prepaid expenses and other current assets	254			508
Total current assets	13,613			11,845
Restricted cash	502			227
Property and equipment, net	1,597			1,892
Goodwill	963			1,010
Intangible assets related to acquisition	183			257
Other assets	92			100
Total assets	$	16,950		$	15,331
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable and accrued liabilities	$	1,831		$	1,908
Accrued compensation and related expenses	156			112
Current portion of deferred revenue	882			832
Total current liabilities	2,869			2,852
Other long-term liabilities	660			724
Derivative instrument	642			—
Deferred revenue	13,147			13,335
Total liabilities	17,318			16,911
Contingencies (Note 5)
Stockholders’ deficit:
Common stock	2			97,294
Additional paid-in-capital	107,467			—
Accumulated other comprehensive income	221			275
Deficit accumulated during the development stage	(108,058		)	(99,149		)
Total stockholders’ deficit	(368		)	(1,580		)
Total liabilities and stockholders’ deficit	$	16,950		$	15,331

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cellegy Pharmaceuticals, Inc.

(a development stage company)

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share data)

																	Period from June 26, 1989 (inception) to September 30, 2004
	Three Months Ended September 30,								Nine Months Ended September 30,
	2004				2003				2004				2003
Revenues:
Contract revenue	$	222			$		208		$	638			$	625			$	4,169
Government grants	—				—				—				13				568
Product sales	261				206				613				431				6,482
Total revenues	483				414				1,251				1,069				11,219
Costs and expenses:
Cost of product sales	55				46				131				86				1,638
Research and development	2,529				2,349				6,876				7,732				79,051
Selling, general and administrative	1,093				820				3,520				3,564				35,239
Acquired in-process technology	—				—				—				—				7,350
Total costs and expenses	3,677				3,215				10,527				11,382				123,278
Operating loss	(3,194			)	(2,801			)	(9,276			)	(10,313			)	(112,059			)
Interest and other income	69				134				208				368				6,794
Interest and other expense	—				(3			)	—				(3			)	(1,504			)
Derivative revaluation	(18			)	—				159				—				159
Net loss	(3,143			)	(2,670			)	(8,909			)	(9,948			)	(106,610			)
Non-cash preferred dividends	—				—				—				—				1,448
Net loss applicable to common stockholders	$	(3,143		)	$	(2,670		)	$		(8,909	)	$		(9,948	)	$		(108,058	)
Basic and diluted net loss per common share	$		(0.14	)	$	(0.13		)	$		(0.43	)	$		(0.50	)
Weighted average common shares used in computing basic and diluted net loss per common share	22,396				20,018				20,874				19,941

The accompanying notes are an integral part of these consolidated financial statements.

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Cellegy Pharmaceuticals, Inc.

(a development stage company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Nine Months Ended September  30,						Period from June 26, 1989 (inception) to September 30, 2004
	2004			2003
Operating activities
Net loss	$	(8,909	)	$	(9,948	)	$	(106,610	)
Other operating activities	491			185			32,299
Net cash used in operating activities	(8,418		)	(9,763		)	(74,311		)
Investing activities
Purchases of property and equipment	(12		)	(202		)	(5,212		)
Purchases of investments	—			(11,135		)	(98,910		)
Sales and maturities of investments	3,687			7,395			98,815
Proceeds from sale of property and equipment	—			48			238
Costs related to Biosyn acquisition	(92		)	—			(92		)
Cash used in escrow for Biosyn acquisition	(275		)	—			(275		)
Cash used in acquisition of Vaxis and Quay	—			—			(512		)
Net cash provided by (used in) investing activities	3,308			(3,894		)	(5,948		)
Financing activities
Proceeds from notes payable	—			—			8,047
Repayment of notes payable	—			—			(6,611		)
Proceeds from restricted cash	—			—			386
Other assets	—			—			(614		)
Net proceeds from issuance of common stock	10,873			477			80,511
Issuance of convertible preferred stock, net of issuance costs	—			—			11,678
Net cash provided by financing activities	10,873			477			93,397
Effect of exchange rate changes on cash	(54		)	52			221
Net (decrease) increase in cash and cash equivalents	5,709			(13,128		)	13,359
Cash and cash equivalents, beginning of period	7,650			21,629			—
Cash and cash equivalents, end of period	$	13,359		$	8,501		$	13,359

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cellegy Pharmaceuticals, Inc.

(a development stage company)

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

(Amounts in thousands)

	Nine Months Ended September 30,				Period from June 26, 1989 (inception) to September 30, 2004
	2004		2003
Supplemental cash flow information
Interest paid	$	—	$	—	$	640
Supplemental disclosure of non-cash transactions:
Issuance of common stock in connection with acquired-in-process technology	—		—		7,350
Conversion of preferred stock to common stock					14,715
Issuance of common stock for notes payable	—		—		227
Issuance of warrants in connection with Kingsbridge SSO financing and July 2004 Private Placement	2,082		—		2,082
Issuance of warrants in connection with notes payable financing	—		—		487
Issuance of convertible preferred stock for notes payable	—		—		1,268
Issuance of common stock for milestone payments	—		—		750

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cellegy Pharmaceuticals, Inc.

(a development stage company)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1.  —  Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared by Cellegy Pharmaceuticals, Inc. (the “Company”) in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission.  Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of only normal recurring adjustments, including the elimination of intercompany accounts) considered necessary for a fair presentation of all periods presented. The results of Cellegy’s operations for any interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Cellegy’s Annual Report on Form 10-K for the year ended December 31, 2003.

Liquidity and Capital Resources

At September 30, 2004, the Company had a deficit accumulated during the development stage of $108.1 million. It expects negative cash flow from operations to continue for about the next two years, with the need to continue or expand its development programs and to comercialize products once regulatory approvals have been obtained. The Company’s management believes that its existing cash balances, including proceeds from a private placement financing completed in July 2004 and funding available through the Kingsbridge Structured Secondary Offering facility, will be sufficient to meet its capital and operating requirements through September 30, 2005, assuming no material adverse financial impact associated with the PDI litigation and any subsequent legal proceedings.

Expenditures required to achieve the Company’s growth and profitability in the long term may be greater than projected or the cash flow generated from operations may be less than projected. As a result, its near and long-term capital needs may require additional funding through equity or debt financing, corporate collaborations or other related arrangements, bank financing and other sources. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms it deems acceptable to it, or at all. If the United States Food and Drug Administration approves Cellegesic in January 2005 and adequate funds are not available, the Company could be required to delay development or commercialization of Cellegesic and other products, to outlicense commercial rights to certain products that Cellegy would otherwise seek to commercialize internally or to reduce resources devoted to product development. Accordingly, the Company’s failure to obtain sufficient funds on acceptable terms, when needed, could have a material adverse effect on Cellegy’s ability to achieve its business objectives.

Reclassification

Certain prior year balances have been reclassified for comparative purposes.

Note 2.  —  Comprehensive Loss

Comprehensive loss generally represents all changes in stockholders’ deficit except those resulting from investments or contributions by stockholders. The Company’s unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments represent the only components of comprehensive loss that are excluded from the Company’s net loss.  Total comprehensive loss during the three and nine months ended September 30, 2004 and 2003 consisted of (in thousands):

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
Net loss	$	(3,143	)	$	(2,670	)	$	(8,909	)	$	(9,948	)
Change in translation adjustments	62			(36		)	(54		)	(33		)
Change in unrealized gain (loss)	—			(59		)	—			(9		)
Comprehensive loss	$	(3,081	)	$	(2,765	)	$	(8,963	)	$	(9,990	)

Note 3.  —  Basic and Diluted Net Loss per Common Share

Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share incorporates the incremental shares issued upon the assumed exercise of stock options and warrants, when dilutive. There is no difference between basic and diluted net loss per common share, as presented in the statement of operations, because all options and warrants are anti-dilutive. The total number of shares excluded consisted of (in thousands):

	Nine months ended September 30,
	2004	2003
Options	4,171	2,989
Warrants	864	—
Total number of shares excluded	5,035	2,989

Note 4.  —  Employee Stock Compensation

The Company accounts for its stock option grants in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations. The Company has elected to follow the disclosure-only alternative prescribed by Statement of Financial Accounting Standard (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148 “Accounting for Stock-Based Compensation-Transition and Disclosure”. Under APB 25, because the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Under APB Opinion No. 25, if the exercise price of the Company’s stock options is equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized related to employee or director grants. Compensation for options granted to non-employees has been determined in accordance with SFAS No. 123 and Emerging Issues Task Force (“EITF”) No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services,” at the fair value of the equity instruments issued.

Pro forma information regarding net loss and net loss per common share is required by SFAS No. 123, which requires that the information be determined as if the Company has accounted for its common stock options granted under the fair market value method. The fair market value of options granted has been estimated at the date of the grant using a Black-Scholes option pricing model. Had compensation cost for the Company’s stock-based compensation plans been determined in a manner consistent with the fair value approach described in SFAS No. 123, the Company’s net loss and net loss per common share as reported would have been increased to the pro forma amounts indicated below (in thousands):

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	Three Months Ended September 30,							Nine Months Ended September 30,
	2004			2003				2004				2003
Net loss as reported	$	(3,143	)	$		(2,670	)	$	(8,909		)	$	(9,948		)
Add: Stock based employee costs included in the determination of net loss, as reported	—			8				70				23
Deduct: Stock-based employee compensation costs that would have been included in the determination of net loss if the fair value method had been applied to all awards	(186		)	(351			)	(712			)	(1,189			)
Net loss, pro forma	$	(3,329	)	$	(3,013		)	$		(9,551	)	$		(11,114	)
Basic and diluted net loss per common share, as reported	$	(0.14	)	$	(0.13		)	$	(0.43		)	$		(0.50	)
Pro forma basic and diluted net loss per common share	$	(0.15	)	$	(0.15		)	$	(0.46		)	$		(0.56	)

The Company values its options on the date of grant using the Black-Scholes valuation model. The Company did not issue any options during the third quarter of 2004 and therefore, no valuations were required.

Three Months Ended September 30,
			Nine Months Ended September 30,
2004	2003		2004		2003
—	2.7	%	3.7	%	2.6	%
—	0.0	%	0.0	%	0.0	%
—	89	%	86	%	89	%
—	4.2		4.5		4.2

Note 5.  —  Contingencies

In December 2002, Cellegy entered into an exclusive license agreement with PDI, Inc. (“PDI”) to commercialize Fortigel in North American markets. Under the terms of the agreement, PDI’s Pharmaceutical Products Group is responsible for the marketing and sale of Fortigel, if approved, utilizing its existing sales and marketing infrastructure. Cellegy received a payment of $15.0 million upon signing the agreement and is entitled to receive a milestone payment of $10.0 million on United States Food and Drug Administration, or FDA, approval and royalties following a successful product launch. Cellegy is responsible for supplying finished product to PDI through Cellegy’s contract manufacturer. In July 2003, the FDA issued a Not Approvable letter relating to the Fortigel New Drug Application, or NDA.

In October 2003, Cellegy announced that it received a mediation notice from PDI. The dispute resolution provisions of the license agreement require non-binding mediation before either party may initiate further legal proceedings. The communication asserted several claims relating to the agreement, including Cellegy’s breach of several provisions of the agreement and failure to disclose relevant facts. PDI claimed several kinds of alleged damages, including return of the initial license fee that PDI paid to Cellegy when the agreement was signed. The parties subsequently conducted mediation as contemplated by the agreement but did not reach any resolution of the claims.

In December 2003, Cellegy and PDI both initiated legal proceedings against each other relating to the agreement. Cellegy filed a declaratory judgment action in federal district court in San Francisco against PDI, and PDI initiated an action in federal district court in New York against Cellegy. In its action, Cellegy seeks, among other things, a declaration that it has fully complied with the license agreement and that PDI’s claims are without merit. The federal court in New York decided that the cases would be consolidated in the Northern District of

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California and that future proceedings would be held in that jurisdiction.There can be no assurances regarding the outcome of the litigation, which will likely take at least several more months to resolve. The court currently has scheduled a trial date sometime at the end of the first quarter in 2005, although the date is subject to change. The Company could be required to devote significant time and resources to the proceedings and an unfavorable outcome could have a material adverse impact on our business and financial position. Such potential loss is not estimable at this time.

Note 6.  —  Equity Financing and Issuances

In January 2004, the Company entered into a Structured Secondary Offering (“SSO”) facility agreement with Kingsbridge Capital Limited (“Kingsbridge”).  The facility requires Kingsbridge to purchase up to 3.74 million shares of newly issued common stock at times and in amounts selected by Cellegy over a period of up to two years, subject to certain restrictions.  The Company filed a registration statement with the SEC which was subsequently amended and declared effective on June 1, 2004. The SSO agreement does not prohibit additional debt or equity financings, including Private Investment in Public Equity (“PIPEs”), shelf offerings, secondary offerings or any other non-fixed or future priced securities. If the common stock falls below $1.25 per share, Cellegy will not be able to conduct draw downs on the SSO, and Cellegy could be required to find additional sources of funding to continue to operate under the current plan.  Cellegy initiated a first draw down beginning on June 17, 2004 and ending on July 8, 2004. Through September 30, 2004, the Company issued 141,946 common shares and received proceeds of $533,000.

The timing and amount of any draw downs are at Cellegy’s sole discretion, subject to certain timing conditions, and are limited to certain maximum amounts depending in part on the then current market capitalization of the Company.  Kingsbridge is not obligated to purchase shares if Cellegy’s stock price is below $1.25 per share.  The purchase price of the common stock will be at discounts ranging from 8% to 12% of the average market price of the common stock prior to each future draw down.  The lower discount applies to higher stock prices.  In connection with the agreement, Cellegy issued warrants to Kingsbridge to purchase 260,000 common shares at an exercise price of $5.27 per share. Cellegy can, at its discretion and based on its cash needs, determine how much, if any, of the equity line it will draw down in the future, subject to the other conditions in the agreement.

The warrants issued in connection with the SSO facility qualify as a derivative instrument, due to liquidating damages provisions included in the warrant agreement in the event the Company fails to maintain an effective registration statement. This derivate instrument has been valued based on a Black-Scholes model. The factors used to perform Black-Scholes calculation were the following: volatility of 94%, risk free interest rate of 2.86%, dividend yield of 0% and the closing stock price of $4.39 at January 21, 2004, the date of the agreement. The fair value of $800,800 was recorded as a liability upon the warrants issuance in January 2004.  The derivative instrument will be revalued quarterly, as long as it remains outstanding, with the changes in the estimated fair value recorded in other income or expense in the income statement. For the three and nine months ended September 30, 2004, $18,000 was recorded as a derivative revaluation expense and $159,000 was recorded as derivative revaluation income in the income statement, respectively, related to changes in the valuation of the warrants.

On July 27, 2004, Cellegy completed a private placement financing, primarily with existing institutional stockholders, issuing 3,020,000 common shares and warrants to purchase 604,000 shares of common stock, resulting in gross proceeds of $10,327,000. The offering price of the common stock sold was $3.42 per share and the exercise price of the warrants is $4.62 per share.  These warrants are still outstanding at September 30, 2004 and expire on July 27, 2009. The Company calculated the fair value of the warrants using a Black-Scholes model and has allocated a total value of $1,281,000 to the warrants, which has been recorded as additional paid-in-capital. The factors used to perform the Black-Scholes calculation were the following: volatility of 94%, risk free interest rate of 3.45%, dividend yield of 0% and the closing stock price of $3.51 at July 27, 2004, the completion date of the private placement. The issued shares and the shares issuable upon exercise of the warrants were registered for resale on a Form S-3 Registration Statement which was declared effective by the Securities and Exchange Commission on September 29, 2004.

Note 7.  —  Delaware Reincorporation

On September 2, 2004, Cellegy Pharmaceuticals, Inc., a California corporation (“Cellegy California”), consummated a merger with and into its wholly owned subsidiary, Cellegy Pharmaceuticals, Inc., a Delaware

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corporation (“Cellegy Delaware”) (the “Reincorporation”).  As a result of the Reincorporation, the registrant is now a Delaware corporation. As provided by the Agreement and Plan of Merger and Reincorporation, each outstanding share of Cellegy California common stock, no par value, was automatically converted into one share of Cellegy Delaware common stock, $0.0001 par value per share, at the time the Reincorporation became effective.  Each stock certificate representing issued and outstanding shares of Cellegy California common stock continues to represent the same number of shares of Cellegy Delaware common stock.  At September 30, 2004, the par value of the total outstanding shares was $2,300 as reflected on the consolidated balance sheet.

Note 8  —  Segment Reporting

The Company has two business segments: pharmaceuticals and skin care.  Pharmaceuticals include primarily research and clinical development expenses for potential prescription products to be marketed directly by Cellegy or through corporate partners.

Current pharmaceutical revenues consist primarily of Rectogesic sales in Australia, New Zealand and South Korea, in addition to the PDI and ProStrakan license revenue for Fortigel and Tostrex, respectively. The Company expects to complete other corporate collaborations in the future for a number of its potential pharmaceutical products, which may result in milestones, development funding and royalties on sales.

The skin care business segment includes development expenses for non-prescription moisturizer and anti-aging products.  The Company’s product sales are to one customer, Gryphon Development, Inc., which is selling one of the Company’s skin care products, exclusively in the United States, through a major specialty retailer.

Cellegy allocates its revenues and operating expenses to each business segment, but does not assess segment performance or allocate resources based on a segment’s assets and, therefore, asset depreciation and amortization and capital expenditures are not reported by segment.  Operating expenses for the skin care business segment only include cost of goods sold to Gryphon. The rest of the Company’s operating expenses are allocated to the pharmaceutical segment.

The following table contains information regarding revenues and loss from operating each business segment (in thousands):

	Three Months Ended September 30,
								Nine Months Ended September 30,
	2004				2003			2004				2003
Revenues:
Pharmaceuticals	$		394		$	320		$	1,070			$	920
Skin care	89				94			181				149
	$		483		$	414		$	1,251			$	1,069
Operating income (loss):
Pharmaceuticals	$	(3,252		)	$	(2,861	)	$		(9,394	)	$		(10,350	)
Skin care	58				60			118				37
	$	(3,194		)	$	(2,801	)	$		(9,276	)	$		(10,313	)

All of the Company’s assets are related to the pharmaceutical segment and most of these assets are located in the United States.

Note 9.  —  Licenses and Other Agreements

In July 2004, Cellegy and ProStrakan Group Ltd (“ProStrakan”) entered into to an exclusive license agreement for the future commercialization of Tostrex^TM (testosterone gel) in Europe. Under the terms of the agreement, ProStrakan will be responsible for regulatory filings, sales, marketing and distribution of Tostrex throughout the

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European Union (“EU”) and in certain nearby non-EU countries. Cellegy will be responsible for supplying finished product to ProStrakan through its contract manufacturer. Assuming successful commercial launch, Cellegy could receive up to $5.75 million in total payments in addition to a royalty on net sales of Tostrex.  Cellegy received a $500,000 non-refundable upfront payment in July 2004. The upfront payment has been recorded as deferred revenue and is being amortized over the ten-year estimated product life. In addition, ProStrakan has granted a right of first negotiation to Cellegy to license its oral testosterone-glucoside product, which is currently undergoing a Phase 1 clinical study in the United States.

On August 25, 2004, Cellegy was granted marketing approval of Rectogesic in the United Kingdom. Under the terms of the Asset Purchase Agreement between Cellegy and Neptune Pharmaceuticals entered into in December 1997, Cellegy was required to pay a $750,000 milestone payment in either cash or common shares. A research and development expense of $750,000 was recorded in the third quarter of 2004. Subsequent to September 30, 2004, the Company issued 204,000 common shares to Neptune Pharmaceuticals and its affiliates based on the $3.66 closing price of the common stock on August 25, 2004.

Note 10.  —  Subsequent Events

On October 7, 2004, Cellegy announced that it has entered into a definitive agreement to acquire Biosyn, a privately-held, development stage, biopharmaceutical company. The acquisition was completed on October 22, 2004. Biosyn is a leader in the development of a contraceptive gel product for the prevention of HIV-AIDs in women. Under the terms of the agreement, Cellegy exchanged 2,462,000 shares of its common stock for 100% of Biosyn’s issued and outstanding capital stock, paid $3,154,000 in cash to satisfy certain balance sheet liabilities and assumed outstanding Biosyn options and warrants, which are exercisable, to acquire approximately 319,000 shares of Cellegy common stock. Up to an additional $15.0 million is payable in cash contingent upon future commercial launch of Biosyn’s lead product Savvy (C31G vaginal gel), in the United States and selected major overseas markets, following regulatory approvals. As of September 30, 2004, a total of $275,000 was recorded as restricted cash related to the Biosyn acquistion. This acquisition will be accounted for as an asset acquisition using the purchase method.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cellegy Pharmaceuticals is a development stage specialty biopharmaceutical company.  We were incorporated in California in 1989 and reincorporated in Delaware during the third quarter of 2004.  Upon approval by the United States Food and Drug Administration, or FDA, of one or more of our pharmaceutical products, we will exit the development stage to become a commercial company and a leader in the marketing and sales of prescription biopharmaceutical products directed toward the treatment of gastrointestinal conditions and sexual dysfunction using proprietary topical formulations and nitric oxide (“NO”) donor technologies. Key elements of our business and commercialization strategy include self-marketing to specialty physicians in the United States, acquisitions of complementary products and companies and out-licensing of product rights in major overseas markets.

We are developing several prescription drug candidates, including: Cellegesic™  (nitroglycerin ointment) for the treatment of anal fissures and hemorrhoids; two transdermal testosterone gel product candidates, Fortigel™ (testosterone gel) for the treatment of male hypogonadism, a condition that afflicts men, generally above the age of forty, and Tostrelle™ (testosterone gel), for the treatment of sexual dysfunction in menopausal women and Savvy, for female contraception and HIV-AIDs prevention. Other pipeline products include NO donors for the treatment of female sexual dysfunction, Raynaud’s Disease, restless leg syndrome and prostate cancer.  Cellegesic was approved for sale in the United Kingdom in August 2004 and a decision by the FDA on approvability for sale in the United States is expected by early January 2005.

General

In January 2004, we entered into a Structured Secondary Offering (“SSO”) facility agreement with Kingsbridge Capital Limited.  The facility requires Kingsbridge to purchase up to 3.74 million shares of newly issued common stock at times and in amounts selected by us over a period of up to two years, subject to certain restrictions.  We

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filed a registration statement with the Securities and Exchange Commission which was subsequently declared effective on June 1, 2004. The SSO agreement does not prohibit us from conducting additional debt or equity financings, including PIPEs, shelf offerings, secondary offerings or any other non-fixed or future priced securities. If our common stock falls below $1.25 per share, we will not be able to conduct draw downs on the SSO. We initiated a first draw down beginning on June 17, 2004 and ending on July 8, 2004. A total of 141,946 common shares have been issued resulting in proceeds of  $533,000.

 In January 2004, we announced results of a preliminary analysis of our third Cellegesic Phase 3 clinical trial showing a reduction in anal fissure pain compared with a placebo control during the first three weeks of the trial, the primary efficacy endpoint of the study.  The double blind, placebo controlled trial was conducted according to a Special Protocol Assessment, or SPA, that was agreed to by the Company and the FDA.  A New Drug Application  (“NDA”) was submitted to the FDA in June 2004 and the FDA granted “Priority Review” status in October 2004, with a decision on approvability now expected in January 2005.

In July 2004, Cellegy announced that the United Kingdom’s Committee on Safety of Medicines (“MHRA”) will recommend that marketing authorization be granted by the Medicines and Healthcare Products Regulatory Agency for Cellegesic^TM (branded Rectogesic^® outside the United States). In August 2004, the MHRA issued an approvable letter for Rectogesic.

In July 2004, Cellegy and ProStrakan Group Ltd (“ProStrakan”)  entered into to an exclusive license agreement for the future commercialization of Tostrex^TM (testosterone gel) in Europe. Under the terms of the agreement, ProStrakan will be responsible for regulatory filings, sales, marketing and distribution of Tostrex throughout the European Union and in certain nearby non-EU countries. Cellegy will be responsible for supplying finished product to ProStrakan through Cellegy’s contract manufacturer. Assuming successful commercial launch, Cellegy could receive up to $5.75 million in total payments in addition to a royalty on net sales of Tostrex. Cellegy received a $500,000 non-refundable upfront payment in July 2004.

On July 27, 2004, Cellegy completed a private placement financing, primarily with a small number of existing institutional stockholders, issuing 3,020,000 common shares and warrants to purchase 604,000 shares of common stock, resulting in gross proceeds of $10.3 million. The offering price of the common shares sold was $3.42 per share and the exercise price of the warrants is $4.62 per share.

On October 7, 2004, Cellegy announced that it has entered into a definitive agreement to acquire Biosyn, Inc. (“Biosyn”), a privately-held biopharmaceutical company. The acquisition was completed on October 22, 2004. Biosyn is a leader in the development of a contraceptive gel product for the prevention of HIV-AIDs in women. Under the terms of the agreement, Cellegy exchanged 2,246,000 shares of its common stock for 100% of Biosyn’s issued and outstanding capital stock, paid $3,154,000 in cash to satisfy certain balance sheet liabilities and assumed outstanding Biosyn options and warrants which are exercisable to acquire approximately 319,000 shares of Cellegy common stock. Up to an additional $15.0 million is payable in cash contingent upon future commercial launch of Biosyn’s lead product Savvy, in the United States and selected major overseas markets, following regulatory approvals.

Results of Operations

Revenues. Cellegy had revenues of $483,000 and $414,000 for the three months ended September 30, 2004 and 2003, respectively.  During the three months ended September 30, 2004, revenues consisted of $172,000 in Rectogesic® (nitroglycerin ointment) sales in Australia, $90,000 in skin care product sales to Gryphon Development, the product development division of a major specialty retailer and $208,000 and $13,000 in PDI revenue and ProStrakan licensing revenue for Fortigel and Tostrex, respectively. For the same period last year, revenues consisted of $112,000 in Australian Rectogesic sales, $94,000 in skin care product sales and $208,000 in licensing revenue for Fortigel.

Cellegy had revenues of $1,251,000 and $1,069,000 for the nine months ended September 30, 2004 and 2003, respectively. During the nine months ended September 30, 2004, revenues consisted primary of $432,000 in Australian Rectogesic sales, $638,000 in PDI and ProStrakan licensing revenue and $181,000 in product sales to Gryphon. For the same period last year, revenues consisted of $282,000 in Australian Rectogesic sales, $625,000 in licensing revenue for Fortigel, $149,000 in product sales to Gryphon and $13,000 in Canadian government grants.

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The licensing revenue of $208,000 from PDI for each of the three quarters of 2004 reflected the quarterly recognition, over the term of the license agreement with PDI, associated with the $15.0 million upfront payment received from PDI in December 2002. The licensing revenue of $13,000 for Tostrex in the third quarter of 2004 reflected the quarterly recognition, over the 10 year estimated life of the product, associated with the $500,000 upfront payment received from ProStrakan in the July 2004 license agreement. We will continue to record these licensing revenues in the same manner for subsequent quarters assuming that the conditions of the license agreements with PDI and/or ProStrakan and the estimate of the lives of the products do not change.

Research and Development Expenses. Research and development expenses, which were primarily clinical costs, were $2,529,000 for the three months ended September 30, 2004, compared with $2,349,000 for the same period last year. Higher research and development expenses for the three months ended September 30, 2004, compared with the same period last year were due primarily to the recognition of a $750,000 milestone payment to Neptune Pharmaceuticals and its affiliates associated with the approval of Rectogesic in the United Kingdom during this year’s third quarter, offset somewhat by reduced clinical trial and regulatory activities.

During the nine months ended September 30, 2004 and 2003, research and development expenses were $6,876,000 and $7,732,000, respectively. Lower research and development expenses for the nine months ended September 30, 2004, compared with the same period last year, were primarily due to reduced clinical trial and regulatory activity this year, compared with peak clinical and regulatory spending for our Cellegesic and Fortigel product candidates last year, partially offset by the $750,000 milestone payment to Neptune Pharmaceuticals and its affiliates. Clinical expenses will increase in the first quarter of 2005 should Cellegy begin a Phase 3 clinical trial with Fortigel, currently under discussion with the FDA, and/or if planned advanced clinical studies using Tostrelle gel to treat female sexual dysfunction are initiated.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $1,093,000 for the three months ended September 30, 2003 or $273,000 higher than expenses of $820,000 in expenses for the same period last year.  Higher spending in 2004 was primarily due to an increase of $95,000 in legal and professional fees related to the Delaware reincorporation and an increase of approximately $178,000 in other professional and administrative fees related primarily to external reporting, investor communications and our Sarbanes-Oxley compliance program.

During the nine months ended September 30, 2004 and 2003, general and administrative expenses were $3,520,000 and $3,564,000 respectively. Expenses in the first nine months of this year compared with the same period last year were lower by $44,000. Increased expenses during this year’s nine months, included $605,000 in legal fees associated with litigation, external reporting, consulting, professional services and our Sarbanes-Oxley compliance program and approximately $95,000 in additional legal and professional fees associated with the Delaware reincorporation. These expenses were more than offset by $318,000 in compensation expenses, $320,000 write-off of capitalized tenant improvements at our South San Francisco facility and $106,000 in amortization expense relating to our Cellegy Australia acquisition during the first nine months in 2003.

 Selling, general and administrative expenses are expected to increase throughout the rest of this year and next year, primarily in support of our domestic launch of Cellegesic, assuming approval by the FDA and for additional accounting and consulting fees associated primarily with our Sarbanes-Oxley compliance program.

Interest and Other Income (Expense), Net.  For the three months ended September 30, 2004, Cellegy had net interest and other income of $51,000, comprised of $69,000 in interest and rental income and $18,000 in other derivative revaluation expense associated with the Kingsbridge warrants. For the three months ended September 30, 2003, Cellegy had net interest and other income of $131,000, comprised of $134,000 in interest and rental income and $3,000 in other expense. For the nine months ended September 30, 2004, Cellegy recorded net interest and other income of $367,000, including interest and rental income of $208,000 and $159,000 in other derivative income associated with the Kingsbridge warrants. For the nine months ended September 30, 2003, net interest and other income was $365,000, consisting of $343,000 in interest and rental income, $25,000 in other income and $3,000 in interest expense.

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Liquidity and Capital Resources

We have experienced net losses from operations each year since our inception. Through September 30, 2004, we incurred an accumulated deficit of $108.1 million and consumed cash from operations of $74.3 million. Cash from equity financing transactions have included $6.4 million in net proceeds from our initial public offering in August 1995, $6.8 million in net proceeds from a preferred stock financing in April 1996, $3.8 million in net proceeds from a private placement of common stock in July 1997, $13.8 million in net proceeds from a follow-on public offering in November 1997, $10.0 million in net proceeds from a private placement in July 1999, $11.6 million in net proceeds from a private placement in October 2000, $15.2 million in net proceeds from a private placement in June 2001, $5.2 million in net proceeds from a private placement in November 2002,  $533,300 in proceeds from the draw downs of the Kingsbridge SSO and $10.3 million in net proceeds from a private placement in July 2004.

During the third quarter of 2004, our cash and investments balance, including restricted cash, increased by $8.0 million. We received net financing proceeds of $10.6 million and $500,000 in upfront payments from ProStrakan. These additions to cash and investments, including restricted cash, were offset somewhat by cash used during the quarter of about $3.1 million. This quarterly and nine months cash usage was in line with our goal to preserve cash and focus on key clinical and product development programs. Our cash needs are expected to increase later this year and in 2005 as we prepare for the marketing launch of Cellegesic in the United States, assuming FDA approval, and to cover potential additional payments in support of Biosyn’s operating expenses not covered by various government and non-government organization grants and planned increases in clinical trial activity. Although we expect that most of clinical and operating expenses associated with the Biosyn operation will be covered by grants, Cellegy may be required to fund certain expenditures and new programs. We have disbursed $3.2 million for the Biosyn acquisition earlier in the fourth quarter. Future expenditures and capital requirements depend on numerous factors including, without limitation: the progress and focus of our research and development programs; the timing and scope of pre-clinical and clinical programs, particularly the planned Phase 3 trials for Fortigel and Tostrelle; the time and costs involved in obtaining regulatory approvals; the progress and outcome of the Cellegy/PDI litigation; the costs of filing, prosecuting, defending and enforcing patent claims, oppositions and appeals; our ability to establish new collaborative arrangements; the validation of a second contract manufacturing site; potential expenses required to support Biosyn’s operations; and the initiation of commercialization activities and working capital increases associated with the scale up, manufacture and potential launch of Cellegesic.

We expect negative cash flow from operations to continue for approximately the next two years, in order to expand our development programs and to commercialize products once regulatory approvals have been obtained. Management believes that its existing cash balances and funding available through the Kingsbridge SSO facility, will be sufficient to meet the Company’s capital and operating requirements through, at least, September 30, 2005, assuming no material adverse financial impact associated with the PDI litigation and any subsequent legal proceedings. However, failure to obtain additional funds as described in the next paragraph may affect the timing of development, clinical trials or commercialization activities relating to certain products.

However, our near and long term capital needs will require us to obtain additional funds through equity or debt financing, corporate collaborations, bank financing and other sources. We now have the capability to draw down funds from the Kingsbridge SSO facility up to about an additional $15.0 million but there is no assurance that we can conduct draw downs since this is dependent on our stock price and other conditions in the agreement. There can be no assurance that we will be able to obtain additional financings on terms acceptable to us, if at all. If adequate funds are not available, we could be required to delay development or commercialization of certain products, to license rights to commercialize certain products that we would otherwise seek to commercialize internally or to reduce resources devoted to product development. Accordingly, our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our ability to achieve our near and longer term business objectives.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates were discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003.  No changes in those policies and estimates have occurred during the three quarters of 2004, other than those noted below.

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Derivative Instruments. Cellegy accounts for the warrants issued in January 2004, in conjunction with the Kingsbridge financing, as a derivative financial instrument.  As a derivative, the fair value of the warrant is recorded as a liability in the balance sheet and changes in the fair value of the warrant are recognized as other income or expense during each period.  The fair value of the warrant is expected to change primarily in response to changes in the Company’s stock price. Significant increases in the fair value of the Company’s stock could give rise to significant expense in the period of the change.  Likewise, a reduction in the Company’s stock price could give rise to significant income in the period of the change.

Factors That May Affect Future Operating Results

This Quarterly Report on Form 10-Q includes forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. Investors are cautioned that these forward-looking statements are subject to numerous risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. Words such as “believes,” “anticipates,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-lookingstatements are not guarantees of future performance and concern matters that could subsequently differ materially from those described in the forward-looking statements.

Such risks and uncertainties relate to, among other factors, the outcome of the FDA’s review of the Cellegesic NDA. The FDA may not find that the Cellegesic trial data, the statistical analysis methodology used by Cellegy with the inclusion of post-discontinuation pain scores, the treatment of data from patients who dropped out of the study due to headaches or other sections of the NDA acceptable.  The Agency may not agree that the trial data satisfies the standards specified in the Special Protocol Assessment and may not ultimately grant marketing approval for Cellegesic. Even assuming Cellegesic approval, Cellegy may not have the resources or personnel to successfully launch the product on a timely basis. There are risks and uncertainties associated with our female clinical trial programs for Tostrelle and Savvy in that sufficient resources for clinical development of these product candidates may not be available or one or both drugs may not prove to be safe and effective by standards established by worldwide regulatory authorities. There are also risks associated with our ability to successfully manage and integrate the Biosyn operations and retain key employees related to those operations. Furthermore, there can be no assurances regarding the outcome and timing of ongoing discussions with the FDA, particularly with regard to additional clinical requirements for marketing approval of Fortigel; our ability to complete corporate partnerships relating to Cellegesic in Europe; the outcome of regulatory review in Sweden of our Tostrex product for the treatment of male hypogonadism or, even if approved in Sweden, of regulatory review in other countries; the commercial success of Cellegesic even if approved by the FDA; and the progress and outcome of the PDI litigation.

We undertake no obligation to update or revise the statements made herein, except as specifically required by law. In addition to the factors discussed below, factors that could affect our future business and results of operations, or that could cause actual results to differ from forward-looking statements made herein, are discussed in our annual report on Form 10-K for the year ended December 31, 2003, in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Factors that May Affect Future Operating Results,” and in quarterly reports that we file with the Securities and Exchange Commission.

Item 3.    Quantitative and Qualitative Disclosure of Market Risk

We invest our excess cash in short-term, investment grade, fixed income securities under an investment policy.  However, during this quarter, we currently have all our excess cash in money market funds and have no short or long term investments as of September 30, 2004. We believe that potential near term losses in future earnings, fair values or cash flows related to our investment portfolio will not be significant.

We are incurring market risk associated with the issuance of warrants to Kingsbridge to purchase 260,000 shares of our common stock.  We will continue to calculate the fair value at the end of each quarter and record the difference to other income or expense until the warrants are exercised.  We are incurring risk associated with increases or decreases in the market price of our common stock, which will directly impact the fair value calculation and the non-cash charge or credit recorded to the income statement in future quarters.  For example, if our stock

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price increases by 20% during the fourth quarter of 2004 from its September 30, 2004 value, and all other inputs into the Black-Scholes model remained constant, we would record approximately $180,000 of other expense for the period ended September 30, 2004.  If our stock price decreased by 20% from its value for the same periods, we would record approximately the same amount as other income.

Item 4.    Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)).

Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2004, our disclosure controls and procedures were adequate to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission rules and forms.  The Company is in the process of reviewing, documenting and evaluating its internal controls in response to requirements set forth  under the Sarbanes-Oxley, Section 404 guidelines.

Although Cellegy’s management continues to evaluate the internal control structure and strengthen Cellegy’s controls and procedures, particularly in connection with the requirements of Section  404 of the Sarbanes-Oxley Act of 2002,  during the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II  —  OTHER INFORMATION

Item 1.    Legal Proceedings

In October 2003, we received a communication from PDI, Inc. invoking mediation procedures under the exclusive license agreement between PDI and Cellegy relating to Fortigel.  After mediation was completed in December 2003, both PDI and Cellegy initiated litigation proceedings against each other. Cellegy filed a declaratory judgment action in federal district court in San Francisco against PDI, and PDI initiated an action in federal district court in New York against Cellegy.  In its action, Cellegy seeks, among other things, a declaration that it has fully complied with the license agreement and that PDI’s claims are without merit. The federal court in New York decided that the case would be consolidated in the Northern District of California and that future proceeding would be held in that jurisdiction.

The Company has devoted time and resources to the litigation and will likely be required to devote significant additional time and resources to the litigation. There can be no assurances regarding the outcome of the proceedings, which will likely take at least several more months to resolve.  An unfavorable outcome could have a material adverse impact on our business and financial position.

Item 2.    Changes in Securities and Use of Proceeds

(a)As previously reported on a Form 8-K filed in September 2004, the Company completed its reincorporation from California to Delaware through a merger of the former California corporation into a newly formed wholly-owned Delaware subsidiary. As a result, holders of common stock of the former California corporation became holders of common stock of the successor Delaware corporation and Delaware corporate law rather California corporate law, defines the rights of holders of common stock under applicable state law. The Company’s proxy statement distributed to its shareholders in connection with the 2004 annual meeting of shareholders, at which the reincorporation was approved, includes a comparison of certain provisions of Delaware and California corporate law relating to holders of common stock.

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(b)As previously reported, on July 27, 2004, Cellegy completed a private placement financing, primarily to a small number of existing institutional stockholders, issuing 3,020,000 common shares and warrants to purchase 604,000 shares of common stock, resulting in gross proceeds of $10.3 million. The offering price of the common stock sold was $3.42 per share and the exercise price of warrants was $4.62 per share. The shares were issued in reliance of the exemption from registration provided by Section 4 (2) of the Securities and Exchange Act of 1933, as amended, and/or Regulation D promulgated thereunder.

Item 3.    Defaults Upon Senior Securities

None

Item 4.    Submission of Matters to a Vote of Security Holders

None

Item 5.    Other Information

None

Item 6.    Exhibits

*10.1Employment Agreement dated October 7, 2004, between the Company and Anne-Marie Corner.

*10.2       Biosyn, Inc. 1999 Stock Option Plan.

*10.3Stock Option Assumption Agreement dated October 20, 2004, between the Company and Anne-Marie Corner relating to assumed non-plan stock options.

*10.4Stock Option Assumption Agreement dated October 20, 2004, between the Company and Anne-Marie Corner relating to assumed plan stock options.

*10.5Notice of Assumption of Biosyn Options relating to Anne-Marie Corner’s assumed stock options.

* Represents a management contract or compensatory plan or arrangement.

31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CELLEGY PHARMACEUTICALS, INC.
Date:  November 12, 2004	/s/ K. Michael Forrest
	K. Michael Forrest
	President and Chief Executive Officer
Date: November 12, 2004	/s/ A. Richard Juelis
	A. Richard Juelis
	Vice President, Finance and Chief Financial Officer

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EX-10.1

Exhibit 10.1

October 7, 2004

Anne-Marie Corner

586 West Mermaid Lane

Philadelphia, PA 19118

Dear Anne-Marie:

                By means of this letter agreement (the “Agreement”), we are pleased to confirm the terms of your employment, effective as of the Effective Date (as defined below) and subject to the other terms and conditions herein, with Cellegy Pharmaceuticals, Inc. (“Cellegy” or the “Company”).

1.Effective Date.

This Agreement is entered into in connection with that certain Agreement and Plan of Share Exchange dated as of October 7, 2004 by and between Biosyn, Inc. (“Biosyn”) and Cellegy (the “Exchange Agreement”).  The terms of this Agreement shall become effective (the “Effective Date”) only upon the completion of the “Closing” and the “Effective Time,” as those terms are defined in the Exchange Agreement.  If the Closing of the transactions contemplated by the Exchange Agreement does not occur, then this Agreement shall have no force or effect and shall terminate in its entirety.

2.Impact on Previous Agreements.

Upon and after the Effective Date and the payment to you at the Closing of the amounts specified pursuant to the Exchange Agreement, this Agreement shall replace and supersede all prior employment agreements or employment arrangements, whether written or oral, between you and Biosyn, including, but not limited to, that certain agreement of employment between Biosyn and you dated June 4, 1999 (as the same may be amended, the “Prior Employment Agreement”), that certain Agreement to Defer Salary between Biosyn and you dated as of March 26, 2003, as amended, that certain Amended Agreement for Deferral of Compensation between you and Biosyn dated as of February 17, 2004 and that certain Change of Control Agreement between Biosyn and you dated as of February 18, 2004 (collectively, the “Prior Employment Arrangements”), and upon the Effective Date, all Prior Employment Arrangements shall be terminated in their entirety and shall be of no further force or effect.  Notwithstanding the foregoing, Subsection 7(d) of the Prior Employment Agreement that relates to the assignment by you to Biosyn of inventions or other intellectual property rights, shall survive and remain effective.

3.Duties.

You will serve as Senior Vice President, Women’s Preventive Health and as an Officer of Cellegy Pharmaceuticals, Inc. Your responsibilities will include those described in Exhibit A hereto, subject to the overall directives of the Chief Executive Officer and the Board of Directors of Cellegy.  You will initially report to the Chief Executive Officer.  You agree to devote your full time, effort and attention to the affairs of Cellegy and shall not, during the term of this Agreement, actively engage in any other business activity, whether or not for profit.  The foregoing shall not be construed as preventing you from (a) making investments in other businesses or enterprises, (b) participating in the activities of professional trade organizations related to the business of the Company, as approved by your manager, (c) engaging in civic, charitable or fraternal activities, in each of the above cases whose businesses are not competitive with the Companyprovided that your ownership does not exceed 1% of each such business or enterprise and (d) serving on the boards of directors of not more than one other entity (and up to one additional nonprofit organization) that is reasonably satisfactory to the Company and whose business is not competitive with the Company.  The principal location of your employment will be at the Company’s principal executive office located in Huntingdon Valley, Pennsylvania, although you understand and agree that you may be required to travel from time to time for business reasons.

4.Annual Salary.

Subject to the immediately following sentence, during your first year of employment, Cellegy agrees to pay you a monthly salary at an annual rate of $250,000 per annum (the “Base Salary”), payable in conformity with Cellegy’s normal payroll periods and subject to all applicable withholdings and deductions.  Your salary shall be reviewed by Cellegy’s Board of Directors or Compensation Committee on an annual basis and may be increased in the discretion of the Board or such Committee.  Your first salary review will occur in approximately December 2005 with respect to your Base Salary for the 2006 year.

5.             Bonus.

Promptly after the Effective Date you will be paid a cash bonus of $25,000 in recognition of your performance during the course of 2004.  Effective January 1, 2005, you will be eligible to participate in Cellegy’s bonus programs in a manner and percentage similar to similarly situated Cellegy employees, with Company and individual performance targets for the relevant calendar year to be established by Cellegy’s Board of Directors or the Compensation Committee thereof (and amounts, if any, paid after completion of the year to which such performance targets relate).  As part of this program, you will be eligible to receive an annual cash bonus up to a target amount of 25% of Base Salary based on Company and individual performance.

6.Equity Incentive Programs.

You shall be eligible to participate in future equity incentive programs established by the Company to provide restricted stock, stock options and other equity-based incentives to officers and key employees of the Company.

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7.Business Expenses.

You shall be entitled to reimbursement of travel and entertainment expenses incurred in connection with your services hereunder consistent with the policies of Cellegy, upon receipt of reasonable supporting documentation.

8.Benefits; Vacation/PTO.

You shall be entitled to participate in Cellegy’s benefit plans to the same extent as other similarly situated Cellegy employees, including plans that provide vacation, medical and dental insurance benefits described in Cellegy’s employee handbook, which previously was provided to you.  In general, you will be entitled to the number vacation/paid-time-off (“PTO”) days that are specified in Cellegy’s standard vacation policies for similarly situated employees.  Notwithstanding the foregoing, you will be entitled to carry over to Cellegy the same number of accrued but unused PTO days that you had with Biosyn immediately before the Effective Date, and unused PTO days will carry-over at year-end into the succeedingyear.  However, no additional PTO days shall accrue after the Effective Date until such time as you have used a number of your then accrued PTO days such that the number of your then accrued PTO days is less than the maximum number of PTO days that you would be entitled to under Cellegy’s standard policy regarding PTO days, and at that time, the number of PTO days that you shall be entitled to will be governed by Cellegy’s standard PTO policies.  To the maximum extent permitted under Cellegy’s plans, you will be given credit for the time during which you were employed by Biosyn.  You will also receive such other benefits as are generally made available from time to time to other similarly situated employees of Cellegy.  By signing this Agreement, you agree and acknowledge that in consideration of Cellegy’s assumption of your PTO days accrued while you were employed with Biosyn, neither Cellegy nor Biosyn will have any financial obligation to you with respect to such PTO days in connection with any termination of your employment with Biosyn that may be deemed to occur with respect to the transactions contemplated by the Exchange Agreement and your employment by Cellegy (including without limitation any obligation to make any cash payment to you with respect to such accruedunused PTO days).

9.401(k) Savings Plan.

You will be eligible to participate in Cellegy’s 401(k) plan on the same terms and conditions as other Cellegy employees.

10.Termination.

(a)           Termination of Employment.  Notwithstanding anything contained in this Agreement, this Agreement and your employment hereunder may be terminated at any time (a) voluntarily by you upon prior written notice to Cellegy and (b) by Cellegy immediately upon notice to you.  Cellegy may terminate your employment:

(i)for Cause;

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(ii)by reason of your death;

(iii)by reason of your disability, where such disability has continued for a period of ninety (90) days, whether or not consecutive, in any 365 day period (“disability” shall mean your inability to perform the services contemplated by this Agreement for such period, as determined by a physician reasonably satisfactory to both you and Cellegy; provided, that if you and Cellegy do not agree on a physician, you and Cellegy shall each select one, and these two together will select a third physician, whose determination as to disability shall be binding on all parties); and

(iv)without Cause, for any reason or no reason (with employment terminations by reason of death or disability, or your termination of your employment by reason of your non-renewal of the term of this Agreement, not constituting terminations without Cause).

(b)           Cause.  For the purposes of this Agreement, “Cause” shall be deemed to exist for:

(i)your willful and deliberate failure or a refusal (not resulting from your incapacity due to physical or mental illness) to comply in any material respect with the legal or ethical policies, standards or regulations of the Company (including without limitation the Company’s insider trading policy), or willful and deliberate failure to follow the lawful written directions of the Chief Executive Officer or the Board of Directors, provided that written notice in reasonable detail as to the alleged failure or refusal has been given to you by the Chief Executive Officer or his authorized designate and, if the failure is capable of cure, you have had a reasonable opportunity to cure such failure;

(ii)your misconduct which is materially detrimental to the Company, or willful and deliberate failure or a refusal (not resulting from your incapacity due to physical or mental illness) in any material respect faithfully or diligently, to perform your legal and ethical duties, determined by the Company in accordance with any written agreement between you and the Company or the customary duties of your employment; provided that written notice, in reasonable detail as to the alleged failure or refusal, has been given to you by the Chief Executive Officer or his authorized designate and, if the failure is capable of cure, you have had a reasonable opportunity to cure such failure;

(iii)your deliberate concealment from the Board of any action by you in violation of any legal or ethical policy, standard or regulation set by the Company;

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(iv)any unethical or fraudulent conduct that is demonstrably injurious and materially discredits the Company or is materially detrimental to the reputation, character or standing of the Company;

(v)dishonest conduct or a deliberate attempt by you to do injury to the Company;

(vi)your material breach of any written employment agreement or invention assignment and confidentiality agreement between you and the Company; or

(vii)commission of an unlawful or criminal act (serious in nature) which the Board of Directors or the Chief Executive Officer reasonably concludes would reflect adversely on the Company, or your conviction of a felony or other crime involving embezzlement or fraud involving the money or property of the Company.

11.Effect of Termination.

(a)           General.  Upon termination of your employment, you (or your heirs in the event of your death) will be paid (i) the Base Salary (as defined above) through the date of termination, (ii) any portion of your bonus then earned but not yet paid, and (iii) all other benefits payable in accordance with the applicable plans and programs of Cellegy, and all rights and benefits hereunder shall cease except as expressly provided herein.

(b)           Termination.  In the event that Cellegy terminates your employment in a termination without Cause or notifies you of Cellegy’s determination not to renew this Agreement upon the expiration of any term or in the event that you terminate your employment for Good Reason (as defined below), then:

(i)            you will be entitled to receive your Base Salary for a period of twelve (12) months, one-half of which shall be paid in a lump sum payment as of the date of termination and the other half of which shall be paid in six equal monthly installments on the first day of each of the six calendar months immediately following the date of termination.

(ii)           any stock options granted by Cellegy to you after the Effective Time (the “Post-Acquisition Options”) will become vested and exercisable on a pro rata basis through the date of termination (with vesting for the year in which termination occurred to be on a monthly basis for the portion of the year in which the termination occurred) and you shall have 90 days in which to exercise the options; provided, however, that if your employment is terminated in a Termination upon Change of Control as defined in Cellegy’s Retention and Severance Plan for Executives (the “Retention Plan”), then all Post-Acquisition Options will become fully vested and exercisable as provided in the Retention Plan.

(iii)          if you elect coverage under COBRA, you will receive, by means of payment by Cellegy on behalf of yourself, your spouse and your dependents of the applicable premiums, continued provision of the Company’s health-related and other standard employee

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insurance coverages as are in effect immediately prior to such employment termination for a period of twelve (12) months following such termination (with you remaining responsible for such deductibles or percentage of payments under such insurance as you were responsible for contributing immediately before the employment termination).  You will be responsible for all taxes relating to any payments made pursuant to this Section 10, and the amounts of any such payments will be reduced by any amounts required to be withheld or deducted by the Company from the payments.  The date of the “qualifying event” for you and your spouse and dependents shall be the date of your employment termination.  Notwithstanding the preceding provisions, in the event you become covered as a primary insured (that is, not as a beneficiary under a spouse’s or partner’s plan) under another employer’s group health plan that is comparable or superior to Cellegy’s health plan during the period provided for herein, you shall promptly shall inform the Company and the Company shall cease provision of continued group health insurance for you and any family.

For purposes of this paragraph, “Good Reason” shall mean: assignment to you of a title position, responsibilities or duties that are materially less than the title position, responsibilities and duties that you occupied immediately after the Effective Time (except that following a Change of Control (as defined in the Company’s Retention and Severance Plan), a reduction in title position, responsibilities or duties solely by virtue of the Company being acquired and made part of a larger entity or operated as a subsidiary shall not constitute Good Reason); (ii) a material breach by the Company of any of the terms of this Agreement; or (iii) a material reduction in your compensation or benefits (other than reductions in benefits under employee benefit plans applicable to officers or employees of the Company generally); provided, in each of the foregoing cases, that you have provided written notice to the Company that an event constituting Good Reason has occurred and the Company has a reasonable opportunity, not to exceed thirty (30) days, to cure such event.

12.Indemnification

Cellegy shall indemnify and defend you and hold you harmless to the fullest extent permitted by Cellegy’s bylaws and applicable law in connection with any claim, action, suit, investigation or proceeding arising out of or relating to performance by you of services for, or action by you as an officer or employee of (i) Biosyn prior to the Effective Date or (ii) Cellegy, or any parent, subsidiary or affiliate of Cellegy after the Effective Date.  Expenses incurred by you in defending a claim, action, suit or investigation or criminal proceedings shall be paid for by Cellegy in advance of the final disposition thereof in accordance with Cellegy’s bylaws and upon the receipt by Cellegy of your undertaking to repay said amount if it shall ultimately be determined that you are not entitled to be indemnified hereunder.  You acknowledge receipt of a copy of such bylaws.  Notwithstanding the foregoing, Cellegy shall not be required:

(a)           (Unlawful Indemnification) to indemnify you with respect to any acts or omissions or transactions from which a court having jurisdiction in the matter shall determine that you may not be relieved of liability under any applicable state or federal law.  In this respect, you acknowledge having been advised that the Securities and Exchange Commission takes the position that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and

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that claims for indemnification should be submitted to appropriate courts for adjudication;

(b)           (Claims Initiated by you) to indemnify or to advance expenses to you with respect to proceedings or claims initiated or brought voluntarily by you and not by way of defense, except as may expressly be required under applicable law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors has approved the initiation or bringing of such suit; or

(c)           (No Duplication of Payments) to indemnify you for expenses or liabilities of any type whatsoever (including, without limitation, judgments, fines, ERISA, excise taxes or penalties, and amounts paid in settlement) to the extent that you have otherwise actually received payment (under any insurance policy, provision of the Company’s certificate of incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.

13.Acknowledgement of No Claims; Release of Claims.

You acknowledge and agree that, except as may be expressly disclosed in the Biosyn Disclosure Schedule relating to the Exchange Agreement and provided that at the Closing of the transactions contemplated by the Exchange Agreement you receive all salary, bonus and benefits payments that are provided for in the Exchange Agreement, as of the date of this Agreement, all accrued salary, bonus pay, cash profit-sharing, termination benefits or other compensation to which you are entitled by virtue of your employment with Biosyn has been satisfied or will be satisfied by Biosyn on or before the Effective Date (other than accrued salary or reimbursements for expenses incurred in the ordinary course of business for pay periods before the Effective Date, all of which will be satisfied by Biosyn before the Effective Date).  You acknowledge and agree that as of the date of this Agreement and as of the Effective Date, you do not have and will not have any claims arising from any omissions, acts or facts that have occurred up until and including the date of this Agreement and the Effective Date against Biosyn, the Company or any of their officers, shareholders, employees, directors, or agents, including without limitation any claims  under any employment laws, including, but not limited to, claims of unlawful discharge, breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of public policy, defamation, emotional distress, claims for additional compensation or benefits arising out of you employment with Biosyn or your separation of employment from Biosyn in connection with the transactions contemplated by the Exchange Agreement, claims under Title VII of the 1964 Civil Rights Act, as amended, and any other laws and/or regulations relating to employment or employment discrimination.  Your right to receive the severance and other benefits described in this Agreement (other than benefits required by law to be paid to you upon employment termination) is conditioned upon your execution and delivery to Cellegy of a release of claims agreement upon employment termination in the form attached as Exhibit B hereto or, if payment of severance and benefits as contemplated by this Agreement are as provided in the Retention Plan, then on the form of release provided in the Retention Plan

14.Term.

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The term of this Agreement shall be for a period of two (2) years beginning on the Effective Date, unless terminated earlier as provided in Section 9 hereof, and shall renew automatically for successive one (1) year terms unless either you or Cellegy notifies the other in writing of your or its determination not to renew this Agreement at least sixty (60) days prior to the termination of the immediately preceding term.

15.Secrecy and Non-Competition.

(a)           Non-Competing Employment.  You acknowledge that the agreements and covenants contained in this Section are essential to protect the value of the Company’s business and assets (including resulting from the acquisition of the business of Biosyn) and, by your current employment with the Company, you have obtained and will obtain such knowledge, contacts, know-how, training and experience and there is a substantial probability that such knowledge, know-how, contacts, training and experience could be used to the substantial advantage of a competitor of the Company and to the Company’s substantial detriment.  Therefore, you agree that for the period commencing on the Effective Date and ending on the first anniversary of the termination of employment hereunder (such period is hereinafter referred to as the “Restricted Period”) with respect to any geographical area in which the Company is engaged in business or actively contemplating engaging in business in the immediate future during your term of employment with the Company, you shall not participate or engage, directly or indirectly, for your benefit or on behalf of or in conjunction with any person, partnership, corporation or other entity, whether as an employee, consultant, advisor, agent, officer, director, shareholder, partner, joint venturer, investor or otherwise, in the research, development or commercialization of any technologies, intellectual property, potential products or products relating to (i) anti-microbial spermicides or intravaginal gels used for contraception or the prevention or reduction in transmission of infectious or sexually transmitted diseases, or (ii) any other business of the Company that you become substantially engaged in during the period of time that you are an employee of, or consultant to, the Company after the Effective Time (collectively, the “Restricted Field”), which technologies or products are competitive with any technology, intellectual property, potential products, or products or application thereof in the Restricted Field designed, contemplated to be implemented in the immediate future, under research or development, marketed, announced, leased or sold by the Company or any of its subsidiaries (which term for purposes of this Section includes the Company and/or Biosyn either before or after the Effective Date) during your term of employment with the Company or any of its subsidiaries or at the time of the termination of your employment; provided, however, that you may own any securities of any company which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent of any class of stock or securities of such company.

(b)           Nondisclosure of Confidential Information.  Except in connection with your employment hereunder, you shall not disclose to any person or entity or use, either during the term of your employment with the Company or any of its subsidiaries or at any time thereafter, any information not in the public domain, is generally known in the industry or has been independently developed and disclosed by others, in any form, acquired by you while employed by the Company (or any subsidiary) or any predecessor to the Company’s business or, if acquired following the term of your employment with the Company, such information which, to

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your knowledge, has been acquired, directly or indirectly, from any person or entity owing a duty of confidentiality to the Company or any of its subsidiaries or affiliates, relating to the Company, its subsidiaries or affiliates, including but not limited to information regarding customers, vendors, suppliers, trade secrets, training programs, manuals or materials, technical information, contracts, systems, or other data (including the revenues, costs or profits associated with any of the Company’s products or services), business plans, code books, invoices and other financial statements, computer programs, software systems, databases, discs and printouts, plans (business, technical or otherwise), customer and industry lists, correspondence, internal reports, personnel files, sales and advertising material, telephone numbers, names, addresses or any other compilation of information, written or unwritten, which is or was used in the business of the Company or any subsidiaries or affiliates thereof.  You agree and acknowledge that all of such information, in any form, and copies and extracts thereof, are and shall remain the sole and exclusive property of the Company, and upon termination of your employment with the Company, you shall return to the Company the originals and all copies of any such information (whether in hard copy, electronic form or otherwise) provided to or acquired by you in connection with the performance of your duties for the Company or any subsidiary, and shall return to the Company all files, correspondence and/or other communications received, maintained and/or originated by you during the course of your employment.

                (c)           No Interference.  During the Restricted Period, you shall not, whether for your own account or for the account of any other individual, partnership, firm, corporation or other business organization (other than the Company), directly or indirectly solicit, endeavor to entice away from the Company or its subsidiaries, or otherwise directly interfere with the relationship of the Company or its subsidiaries with any person who is employed by or otherwise engaged to perform services for the Company or its subsidiaries (including, but not limited to, any independent sales representatives or organizations) or who is, or was within the then most recent twelve-month period, a customer or client of the Company or other entity having a business relationship with the Company, its predecessors or any of its subsidiaries.  The placement of any general classified or “help wanted” advertisement and/or general solicitations to the public at large shall not constitute a violation of this Section unless your name is contained in such advertisements or solicitations.

                (d)           Inventions, etc.  By signing this Agreement you hereby sell, transfer and assign to the Company or to any person or entity designated by the Company your entire right, title and interest in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by you, solely or jointly, during your employment by the Company (or any subsidiary) which relate to methods, apparatus, designs, products, processes or devices, sold, leased, used or under consideration or development by the Company (or any subsidiary), or which otherwise relate to or pertain to the business, functions or operations of the Company (or any subsidiary) or which were made or conceived during business hours or using the facilities or other resources of the Company (or any subsidiary).  You shall communicate promptly and disclose to the Company, in such form as the Company requests, all information, details and data pertaining to the aforementioned inventions, ideas, disclosures and improvements; and you shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents as may be necessary or required to permit the Company or any person or entity designated by the Company to file and prosecute the patent

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applications and, as to copyrightable material, to obtain copyright thereof.  Any invention relating to the business of the Company (or any subsidiary) and disclosed by you within one year following the termination of your employment with the Company shall be deemed to fall within the provisions of this Section unless proved to have been first conceived and made following such termination.  No later than the Effective Date, you agree to execute Cellegy’s standard form of proprietary information and invention assignment agreement.

(e)           Injunctive Relief.  Without intending to limit the remedies available to the Company, you acknowledge that a breach of any of the covenants contained in Section hereof may result in material irreparable injury to the Company or its subsidiaries or affiliates for which there is no adequate remedy at law, that it may not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, without the necessity of proving irreparable harm or injury as a result of such breach or threatened breach of this Section, restraining you from engaging in activities prohibited by this Section hereof or such other relief as may be required specifically to enforce any of the covenants in Section.

16.           Arbitration.

In order to obtain the many benefits of arbitration over court proceedings, including speed of resolution, lower costs and fees and more flexible rules of evidence, all disputes between you and the Company arising out of or concerning the interpretation of application of this Agreement or its subject matter shall be resolved exclusively by binding arbitration in Philadelphia, Pennsylvania pursuant to the National Rules for the Resolution of Employment Disputes of the American Arbitration Association.  The Company and you hereby waive their rights to have a jury trial for any such disputes.  Arbitration must be demanded within 180 days of the time when the demanding party knows or should have known of the events giving riseof the claim.  The arbitration opinion and award shall be in writing and shall be final, binding and enforceable by any court under the Federal Arbitration Act.  Each party shall pay their own fees and costs in connection with any such arbitration and shall pay one-half of the fees of the arbitrator, but the arbitrator shall have discretion to make a different award of fees and costs in connection with rendering the arbitrator’s opinion and award.  The foregoing provisions are intended to supersede any provisions in the Retention Plan, including Section 9 thereof, concerning arbitration of disputes.

17.           General.

(a)           Assignment.  You may not assign this Agreement or any of its rights and privileges hereunder to any other person, firm or corporation.  Cellegy may assign this Agreement without your consent in connection with any sale of all or substantially all of Cellegy’s business or assets, whether by merger, consolidation, sale of assets, sale or stock, or other similar transaction provided that the successor company agrees in writing to assume the Company’s obligations under this Agreement in their entirety (and any change in employers resulting from the fact that the successor or acquiring company, rather than Cellegy, becomes the employer shall not by itself be deemed a termination of employment hereunder).  This

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Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns.

(b)           Entire Agreement.  This Agreement (together with any nondisclosure, noncompetition, proprietary information and/or invention assignment agreement(s) with Biosyn or the Company that you have executed or will execute and all other agreements and documents referred to herein) constitutes the entire agreement between the parties with reference to the subject matter hereof and, except as expressly set forth in Section 2 above, supersedes all prior negotiations, understandings, representations and agreements, if any, relating to your employment by Biosyn or Cellegy. If and to the extent any such other agreements or documents shall be inconsistent in any respect with the provisions of this Agreement, the provisions of this Agreement shall prevail.

(c)           Governing Law; Consent to Jurisdiction.  The provision of this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding any application of any doctrine of conflicts of laws.  Without limiting the effect of the other provisions in this Agreement requiring arbitration of disputes arising hereunder, each party irrevocably consents to the exclusive jurisdiction and venue of the state and federal courts for the federal and state judicial district in which such party is entitled to initiate an arbitration proceeding in accordance with Section 16 above in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default of this Agreement, or otherwise arising under or by reason of this Agreement, and agrees that service of process in any such action may be effected by the means provided in this Agreement for delivery of notices.

(d)           Severability.  If any provision contained in this Agreement is determined to be void, invalid or unenforceable in whole or in part for any reason whatsoever, such determination shall not affect or impair the validity of any other provision herein, nor the validity of this Agreement as a whole.  Each provision of this Agreement shall be deemed to be separate and distinct.  Without limiting the foregoing, you acknowledge and agree that the covenants set forth in Section 15 above are reasonable and valid in geographical and temporal scope and in all other respects.  If any of such covenants or such other provisions are found to be invalid or unenforceable by a final determination of a court of competent jurisdiction, (i) the remaining terms and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

(e)           Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

(f)            Termination of Exchange Agreement.  If the Exchange Agreement is terminated in accordance with its terms, then this Agreement and the obligations of the parties hereunder shall immediately terminate.

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(g)           Notices.  All notices and other communications required or permitted under this Agreement will be in writing and hand delivered, sent by telecopier, sent by certified first class mail, postage pre-paid, or sent by nationally recognized express courier service.  Such notices and other communications will be effective:  (a) upon receipt if hand delivered; or (b) three (3) days after mailing if sent by mail; and (c) one (l) business day after delivery to a national overnight courier service for next business day delivery, to the following addresses, or such other addresses as any party may notify the other parties in accordance with this Section:

If to Cellegy or Employee:	With a copy to:
Cellegy Pharmaceuticals, Inc.	Weintraub Genshlea Chediak Sproul
349 Oyster Point Boulevard	400 Capitol Mall, Eleventh Floor
South San Francisco, CA 94080	Sacramento, CA 95814
Attention: Chief Financial Officer	Attention: C. Kevin Kelso, Esq.
If to Employee:	With a copy to:
Anne-Marie Corner	Duane Morris LLP
586 West Mermaid Lane	One Liberty Place
Philadelphia, PA 19118	Philadelphia, PA 19103-7396
	Attention: Kathleen M. Shay, Esq.

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt.

[Remainder of this page intentionally left blank]

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                Please confirm your acceptance of the foregoing by signing this Agreement where indicated below.  Your signature below indicates your acceptance of this Agreement and its terms and conditions, and we both intend, acknowledge and agree that this is a binding contract enforceable in accordance with these terms.

Yours very truly,

CELLEGY PHARMACEUTICALS, INC.

By:/s/ K. Michael Forrest_______________________

                K. Michael Forrest,

Chief Executive Officer

I accept the terms of the agreement as outlined above:

/s/ Ann-Marie Corner________________________                                  Date:  October    , 2004

Anne-Marie Corner

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EXHIBIT A

EMPLOYMENT RESPONSIBILITIES

1.Assume direct responsibility for the strategic direction and management of the Company’s microbicide business, as well as administrative management of all employees located at the Huntingdon Valley, PA facility.

2.Prepare, obtain approval for and manage annual budgets for the microbicide business.  As requested, prepare longer-range forecasts and projections.

3.Participate proactively in Cellegy’s overall strategic planning process, working cooperatively with the CEO, Corporate Development, Regulatory Affairs, Clinical Research, R&D, Finance, Human Resources and Marketing/Sales.

4.As requested, attend Cellegy’s Board of Directors meetings in order to provide updates and input into the strategic direction and operations of the microbicide business.

5.Assume direct responsibility for coordination with granting agencies to effectively manage relationships and ensure that adequate resources are available to support core programs.

6.As requested, attend conferences, conventions, road shows and meetings with members of the investment and medical community, as well as with other constituents in order to obtain information and/or make presentations relevant to the microbicide business.

7. Implement a proactive program designed to educate and keep the CEO and/or his designates current regarding all aspects of the microbicide business, including a planned program to meet with potential licensing partners, granting and potential granting agencies, CROs and other key organizations to accomplish objectives agreed upon from time to time.

8.As directed, and in coordination with the Vice President, Corporate Development, meet with potential licensing partners an/or M&A targets to accomplish objectives agreed upon from time to time with the CEO.

9.Seek advice and actively provide assistance to and cooperation with employees of Cellegy from various disciplines, in particular Clinical, Regulatory, Research, Development, and Finance in order to effectively manage the microbicides business.

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EXHIBIT B

RELEASE OF CLAIMS

THIS RELEASE OF CLAIMS (“Release”) is entered into between             (“Employee”) and Cellegy Pharmaceuticals, Inc. (“Cellegy”).

1.             Payment of Separation Benefits.  I understand that my employment with Cellegy has terminated.  Cellegy has agreed that if I choose to sign this Release on or after my last day of employment, Cellegy will provide me separation benefits (the “Separation Benefits”) set forth in pursuant to the employment letter agreement between Cellegy and me dated             , 2004 (the “Agreement”).  I understand that I am not entitled to these Separation Benefits unless I sign this Release.  Employee agrees to waive or terminate his or her rights to any cash severance or option or restricted stock acceleration or continued vesting under any agreement, other than as described in the Agreement (whether written or oral), with Cellegy that provides that upon a change of control or termination of employment Employee would be entitled to receive any cash severance or acceleration or continued vesting.  This Release and the Agreement contain the entire understanding of Cellegy and Employee with respect to cash severance or option or restricted stock acceleration or continued vesting and supersede any prior agreements with respect to these matters.  I understand that in addition to the Separation Benefits and regardless of whether I sign this Release, Cellegy has paid me all of my accrued salary and vacation earned through my date of termination and any remaining unpaid balance of my bonus that I am entitled to receive and that has not been paid.

2.             Release.

(a)           Each of (i) Employee and Employee’s respective heirs, executors, successors and assigns, and (ii) Cellegy and its parents, subsidiaries, successor, agents, officers and directors, hereby fully and forever release each other and their respective heirs, executors, successors, agents, officers and directors, from and agree not to sue concerning, any and all claims, actions, obligations, duties, causes of action, whether now known or unknown, suspected or unsuspected, that either of them may possess based upon or arising out of any matter, cause, fact, thing, act, or omission whatsoever occurring or existing at any time prior to and including the date of Employee’s termination of employment (collectively, the “Released Matters”), as follows:

(i)            any and all claims relating to or arising from Employee’s employment relationship with Cellegy and the termination of that relationship;

(ii)           any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of, shares of stock of Cellegy, including, without limitation, any claims of fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(iii)          any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and

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implied; breach of a covenant of good faith and fair dealing, both express and implied or promissory estoppel;

(iv)          any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, Older Workers Benefit Protection Act, and the California Fair Employment and Housing Act, and Labor Code section 201, et. seq.;

(v)           any and all claims for violation of the federal, or any state, constitution;

(vi)          any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

(vii)         any and all claims for attorneys’ fees and costs.

This Release does not extend to, and does not result in, a waiver or release of any of the following:  (a) any claim by Employee for workers’ compensation or unemployment benefits; (b) Employee’s rights to indemnity under any indemnity agreement signed by the parties, as well as under Labor Code section 2802; and (c) all rights and benefits to which Employee is entitled under the Agreement.

(b)           Employee and Cellegy acknowledge that they have been advised by legal counsel and are familiar with Section 1542 of the Civil Code of the State of California, which states:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee expressly waives any right or benefit that he has or may have under Section 1542 of the California Civil Code or any similar provision of the statutory or non-statutory law of any other jurisdiction, including Pennsylvania and Delaware.

3.             Acknowledgment of Waiver of Claims under ADEA.  Employee acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary.  Employee and Cellegy agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective Date (defined below) of this Release.  Employee acknowledges that the consideration given for this Release is in addition to anything of value to which Employee was already entitled.  Employee further acknowledges that Employee has been advised by this writing that:

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(a)           Employee should consult with an attorney prior to executing this Release;

(b)           Employee has at least twenty-one (21) days within which to consider this Release, although Employee may accept the terms of this Release at any time within those 21 days;

(c)           Employee has at least seven (7) days following the execution of this Release by the parties to revoke this Release; and

(d)           This Release will not be effective until the revocation period has expired (the “Effective Date”).

4.             Indemnity and Employee Invention Agreement.  Employee and Cellegy agree that all rights and obligations of the parties under any indemnity agreement between the parties and under any invention assignment and confidentiality agreement will continue in effect.

5.             Voluntary Execution of Agreement.  This Release is executed voluntarily and without any duress or undue influence on the part or behalf of the parties hereto, with the full intent of releasing all claims.  The parties acknowledge that:

(a)           they have read this Release;

(b)           they have been represented in the preparation, negotiation, and execution of this Release by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c)           they understand the terms and consequences of this Release and of the releases it contains;

(d)           they are fully aware of the legal and binding effect of this Release.

EXECUTIVE HAS CONSULTED WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE AND UNDERSTANDS THAT, BY SIGNING THIS RELEASE, EXECUTIVE IS GIVING UP ANY LEGAL CLAIMS EXECUTIVE HAS AGAINST CELLEGY PHARMACEUTICALS, INC. EXCEPT AS SET FORTH HEREIN.  EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE DOES SO KNOWINGLY, WILLINGLY, AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN THE AGREEMENT.

                6.             Return of Company Property.  Employee represents and warrants to Cellegy that Employee has returned all real or intangible property or data of Cellegy of any type whatsoever that has been in Employee’s possession or control.

                7.             Nondisparagement.  Employee agrees that Employee will not disparage Cellegy or its products, services, agents, directors, officers, shareholders, attorneys, employees, affiliates, successors or assigns, or any persons acting by, through, or in concert with any of them, with any written or oral statement.

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                8.             Arbitration.  The mandatory binding arbitration provisions set forth in the Agreement are hereby incorporated by referenced.

                9.             Confidentiality.  The contents, terms and conditions of this Release shall be kept confidential by Employee and may not be disclosed by Employee except to Employee’s accountant or attorneys or pursuant to court order or subpoena.  Employee agrees that if Employee is asked for information concerning this settlement, Employee will state only that Employee and Cellegy have reached an amicable resolution of any disputes concerning Employee’s separation from Cellegy.

                10.           Entire Agreement.  This Release sets forth the entire agreement between Employee and Cellegy with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, relating to such subject matter.

[Remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, the parties have executed this Release as of the date set forth below.

EXECUTIVE	CELLEGY PHARMACEUTICALS, INC.
	By:
	Title:
Signature
Date:	Date:

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EX-10.2

Exhibit 10.2

BIOSYN, INC.

1999 STOCK OPTION PLAN

(as amended effective October 7, 2004)

Purpose. BIOSYN, INC. (the “Company”) hereby adopts The Biosyn Inc. 1999 Stock Option Plan (the “Plan”). The Plan is intended to recognize the contributions made to the Company by key employees, directors, consultants and advisors of the Company or any Affiliate, to provide such persons with additional incentive to devote themselves to the future success of the Company or an Affiliate, and to improve the ability of the Company or an Affiliate to attract, retain, and motivate individuals upon whom the Company’s sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company through receipt of rights to acquire Shares of the Company’s Common Stock, $.01 par value per Share (the “Common Stock”).

2.             Definitions. Unless the context clearly indicates otherwise, the following terms shall have the following meanings:

a.             “Affiliate” means a corporation which is a parent corporation or a subsidiary corporation with respect to the Company within the meaning of Section 424(e) or (f) of the Code.

b.             “Board of Directors” means the Board of Directors of the Company.

c.             “Change of Control” shall have the meaning as set forth in Section 9 of the Plan.

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d.             “Code” means the Internal Revenue Code of 1986, as amended.

e.             “Committee” shall have the meaning set forth in Section 3 of the Plan.

f.              “Company” means Biosyn, Inc., a Pennsylvania corporation.

g.             “Disability” shall have the meaning set forth in Section 22(e)(3) of the Code.

h.             “Fair Market Value” shall have the meaning set forth in Subsection 8(b) of the Plan.

“ISO” means an Option granted under the Plan which is intended to qualify as an “incentive stock option” within the meaning of Section 422(b) of the Code.

“Non-qualified Stock Option” means an Option granted under the Plan which is not intended to qualify, or otherwise does not qualify, as an “incentive stock option” within the meaning of Section 422(b) of the Code.

k.             “Option” means either an ISO or a Non-qualified Stock Option granted under the Plan.

1.             “Optionee” means a person to whom an Option has been granted under the Plan, which Option has not been exercised and has not expired or terminated.

m.            “Option Document” means the document described in Section 8 of the Plan which sets forth the terms and conditions of each grant of Options.

n.             “Option Price” means the price at which Shares may be purchased upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the Plan.

o.                    “Shares^” means the shares of Common Stock of the Company which are the subject of Options.

3.             Administration of the Plan. The Plan shall be administered by the Board of

2

Directors o the Company; however, the Board of Directors may designate a committee composed of two or more of its members to operate and administer the Plan in its stead. Any such committee designated by the Board of Directors, and the Board of Directors itself in its administrative capacity with respect to the Plan, is referred to as the “Committee.”

a.             Meetings. The Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of the members of the Committee or acts approved in writing by the unanimous consent of the members of the Committee shall be the valid acts of the Committee.

b.             Grants. The Committee shall from time to time at its discretion direct the Company to grant Options pursuant to the terms of the Plan. The Committee shall have plenary authority to (i) determine the persons to whom, the times at which, and the price at which Option shall be granted, (ii) determine the type of Option to be granted and the number of Shares subject thereto, and (iii) approve the form and terms and conditions of the Option Documents; all subject, however, to the express provisions of the Plan. In making such determination, the Committee may take into account the nature of such Optionee’s services and responsibilities, the Optionee’s present and potential contribution to the Company’s success and such other factors as it may deem relevant. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted under it shall be final, binding and conclusive.

c.             Exculpation. No member of the Committee shall be personally liable for monetary damages as such for any action taken or any failure to take any action in connection with the administration of the Plan or the granting of Options thereunder unless (i) the member of the Committee has breached or failed to perform the duties of such member’s office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as

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amended, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness; provided, however, that the provisions of this Subsection 3(c) shall not apply to the responsibility or liability of a member of the Committee pursuant to any criminal statute or to the liability of a member of the Committee for the payment of taxes pursuant to local, state or federal law.

d.             Indemnification. Service on the Committee shall constitute service as a member of the Board of Directors of the Company. Each member of the Committee shall be entitled without further act on his part to indemnity from the Company to the fullest extent provided by applicable law and the Company’s Articles of Incorporation and/or By-laws in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan or the granting of Options thereunder in which he or she may be involved by reason of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding.

4.               Grants under the Plan.  Grants under the Plan may be in the form of a Non-qualified Stock Option, an ISO or a combination thereof, at the discretion of the Committee.

5.             Eligibility.  All key employees, consultants and advisors of the Company or any Affiliate, and members of the Board of Directors of the Company or any Affiliate shall be eligible to receive Options hereunder. The Committee, in its sole discretion, shall determine whether an individual qualified as a key employee.

6.             Shares Subject to Plan.  The aggregate maximum number of Shares for which Options may be granted pursuant to the Plan is One Million (1,000,000), subject to adjustment as provided in Section 10 of the Plan. The Shares shall be issued from authorized and unissued Common Stock or Common Stock held in or hereafter acquired for the treasury of the Company. If an Option terminates or expires without having been fully exercised for any

4

reason, the Shares for which the Option was not exercised may again be the subject of one or more Options granted pursuant to the Plan.

7              Term of the Plan.  The Plan is effective as of May 21, 1999, the date on which it was adopted by the Board of Directors, subject to its approval prior to May 21, 2000 by a majority of the votes cast by stockholders entitled to vote, or by a method and in a degree that would be treated as adequate under applicable state law in the case of an action requiring shareholder approval. No Option may be granted under the Plan after May 21, 2009. If the Plan is not so approved on or before May 21, 2000, all Options granted under the Plan shall be null and void.

8.             Option Documents and Terms.  Each Option granted under the Plan shall be a Non-qualified Stock Option unless the Option shall be specifically designated at the time of grant to be an ISO for Federal income tax purposes. If any Option designated as an ISO is determined for any reason not to qualify as an incentive stock option within the meaning of Section 422 of the Code, such Option shall be treated as a Non-qualified Stock Option for all purposes under the provisions of the Plan. Options granted pursuant to the Plan shall be evidenced by the Option Documents insuch form as the Committee shall from time to time approve, which Option Documents shall comply with and be subject to all of the terms and conditions contained in the Plan and such other terms and conditions as the Committee shall from time to time require which are not inconsistent with the terms of the Plan.

a.             Number of Option Shares. Each Option Document shall state the number of Shares to which it pertains. An Optionee may receive more than one Option, which may include Options which are intended to be ISO’s and Options which are not intended to be ISO’s, but only on the terms and subject to the conditions and restrictions of the Plan.

b.             Option Price. Each Option Document shall state the Option Price

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which, for a Non-qualified Stock Option, may be less than, equal to, or greater than the Fair Market Value of the Shares on the date the Option is granted and, for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the date the Option is granted as determined by the Committee in accordance with this Subsection 8(b); provided, however, that if an ISO is granted to an Optionee who then owns, directly or by attribution under Section 424(d) of the Code, shares possession more than ten percent of the total combined voting power of all classes of stock of the Company or an Affiliate, then the Option Price shall be at least 110% of the Fair Market Value of the Shares on the date the Option is granted. If the Common Stock is traded in a public market, then the Fair Market Value per share shall be, if the Common Stock is listed on a national securities exchange or included in the Nasdaq National Market System, the last reported sale price thereof on the relevant date, or, if the Common Stock is not so listed or included, the mean between the last reported “bid” and “asked” prices thereof on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc., or as reported in a customary financial reporting service, as applicable and as the Committee determines. If the Common Stock is not traded in a public market, then the Fair Market Value per share shall be as determined in good faith by the Committee.

Exercise. No Option shall be deemed to have been exercised prior to the receipt by the Company of written notice of such exercise and of payment on the terms established by the Committee and in the Option Document of the Option Price for the Shares to be purchased. Each such notice shall specify the number of Shares to be purchased and shall (unless the Shares are covered by a then current registration statement or a Notification under Regulation A under the Securities Act of 1933, as amended (the “Act”)), certain the Optionee’s acknowledgment in form and substance satisfactory to the Company that (a) such Shares are being purchased for investment and not for distribution or resale (other than a distribution or

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resale which, in the opinion of counsel satisfactory to the Company, may be made without violating the registration provisions of the Act), (b) the Optionee has been advised and understands that (i) the Shares have not been registered under the Act and are “restricted securities” within the meaning of Rule 144 under the Act and are subject to restrictions on transfer and (ii) the Company is under no obligation to register the Shares under the Act or to take any action which would make available to the Optionee any exemption from such registration, (c) such Shares may not be transferred without compliance with all applicable federal and state securities law, and (d) an appropriate legend referring to the foregoing restrictions on transfer and any other restrictions imposed under the Option Documents may be endorsed on the certificates. Notwithstanding the foregoing, if the Company determines that issuance of Shares should be delayed pending (A) registration under federal or state securities laws, (B) the receipt of an opinion of counsel satisfactory to the Company that an appropriate exemption from such registration is available, (C) the listing or inclusion of the Shares on any securities exchange or an automated quotation system or (D) the consent or approval of any governmental regulatory body whose consent or approval is necessary in connection with the issuance of such Shares, the Company may defer exercise of any Option granted hereunder until any of the events described in this sentence has occurred.

d.             Medium of Payment. An Optionee shall pay for Shares (i) in cash, (ii) by certified or cashier’s check payable to the order of the Company, or (iii), by such other mode of payment as the Committee may approve, including payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. Furthermore, the Committee may provide in an Option Document that payment may be made in whole or in part in shares of the Company’s Common Stock held by the Optionee. If payment is made in whole or in part shares of the Company’s Common Stock, then the Optionee shall

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deliver to the Company’s Common Stock, then the Optionee shall deliver to the Company certificates registered in the name of such Optionee representing the shares owned by such Optionee, free of all liens, claims and encumbrances of every kind and having an aggregate Fair Market Value on the date of delivery that is at least as great as the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by the payment in shares of Common Stock, endorsed in blank or accompanied by stock powers duly endorsed in blank by the Optionee. In the event that certificates for shares of the Company’s Common Stock delivered to the Company represent a number of shares in excess of the number of shares required to make payment for the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by payment in shares of Common Stock, the stock certificate issued to the Optionee shall represent (i) the Shares in respect of which payment is made, (ii) such excess number of shares. Notwithstanding the foregoing, the Committee may impose from time to time such limitations and prohibitions on the use of shares of the Common Stock to exercise an Option as it deems appropriate.

e.             Termination of Options.

(i)            No Option shall be exercisable after the first to occur of the following:

Expiration of the Option term specified in the Option Document, which shall not occur after (1) ten years from the date of grant, or (2) five years from the date of grant of an ISO if the Optionee on the date of grant owns, directly or by attribution under Section 424(d) of the Code, shares possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of an Affiliate;

Expiration of three months from the date the Optionee’s employment or service with the Company or its Affiliates terminates for any reason

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other than Disability or death or as otherwise specified in Subsection 8(e)(i)(D) or 8(e)(i)(E) below;

Expiration of one year from the date such employment or service with the Company or its Affiliates terminates due to the Optionee’s Disability or death;

A finding by the Committee, after full consideration of the facts presented on behalf of both the Company and the Optionee, that the Optionee has breached his employment or service contract with the Company or an Affiliate, including,

without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his employment or service, or has disclosed trade secrets or confidential information of the Company or an Affiliate. In such event, in addition to immediate termination of the Option, the Optionee shall automatically forfeit all Shares for which the Company has not yet delivered the share certificates upon refund by the Company of the Option Price. Notwithstanding anything herein to the contrary, the Company may withhold delivery of share certificates pending the resolution of any inquiry that could lead to a finding resulting in forfeiture.

The date, if any, set by the Board of Directors as an accelerated expiration date in the event of the liquidation or dissolution of the Company.

The occurrence of such other event as may, at the discretion of the Committee, be established as an early termination date for an Option granted under the Plan.

(ii)           Notwithstanding the foregoing, the Committee may extend the period during which all or any portion of an Option may be exercised to a date no later than the option term specified in the Option Document pursuant to Subsection 8(e)(i)(A), provided that any change pursuant to this Subsection 8(e)(ii) which would cause an ISO to become a non-

9

qualified Stock Option may be made only with the consent of the Optionee.

f.              Transfers. No Option granted under the Plan may be transferred, except by will or by the laws of descent and distribution. During the lifetime of the person to whom an Option is granted, such Option may be exercised only by him.

g.                   Limitation on ISO Grants. In no event shall the aggregate fair market value of the shares of Commons Stock (determined at the time the ISO is granted) with respect to which incentive stock options under all incentive stock option plans of the Company or its Affiliates are exercisable for the first time by the Optionee during any calendar year exceed $100,000.

h.             Other Provisions. Subject to the provisions of the Plan, the Option Documents shall contain such other provisions including, without limitation, provisions authorizing the Committee to accelerate the exercisability of all or any portion of an Option granted pursuant to the Plan, additional restrictions upon the exercise of the Option or additional limitations upon the term of the Option, as the Committee shall deem advisable.

i.              Amendment. Subject to the provisions of the Plan, the Committee shall have the right to amend Option Documents issued to an Optionee, subject to the Optionee’s consent if such amendment is not favorable to the Optionee, except that the consent of the Optionee shall not be required for any amendment made pursuant to Subsection 9 (e)(i) (E) or Section 9 of the Plan, as applicable.

9.               Change of Control.  In the event of a Change of Control, the Committee may take whatever action it deems necessary or desirable with respect to the Options outstanding, including, without limitation, (i) accelerating the expiration or termination date in the respective Option documents to a date no earlier than thirty (30) days after notice of such acceleration is given to the Optionees, and/or (ii) substituting for any outstanding unexercised

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Options new options which shall provide that, subject to such terms and conditions as the Committee may deem appropriate, the Optionee shall be entitled upon the exercise of such new options to receive such securities of the surviving or resulting corporation (or the corporate parent of such corporation that owns at least fifty percent (50 %) of the voting common stock of the surviving or resulting corporation) as the board of directors of such corporation (or such corporate parent, as applicable) shall determine to be equivalent, as nearly as practicable, to the nearest whole number and class of Shares to which Optionee would have been entitled under the terms of the agreement governing the reorganization, merger, consolidation, acquisition of all of the interests or liquidation as if, immediately prior to such event, the Optionee had been the holder of record of the number of Shares which were then subject to such Option.  In addition to the foregoing, in the event of a Change of Control or in the event that the shareholders of the Company (or the Board of Directors, if shareholder action is not required) and the shareholders of the other constituent corporation (or its board of directors if shareholder action is not required) have approved a definitive share exchange agreement which contemplates a Change of Control, Options granted pursuant to the Plan shall become immediately exercisable in full.

A “Change of Control” shall be deemed to have occurred upon the earliest to occur of the following events: (i) the date the shareholders of the Company (or the Board of Directors, if shareholder action is not required) approve a plan or other arrangement pursuant to which the Company will be dissolved or liquidated, or (ii) the date the shareholders of the Company (or the Board of Directors, if shareholder action is not required) approve a definitive agreement to sell or otherwise dispose of substantially all of the assets of the Company, or (iii) the date the shareholders of the Company (or the Board of Directors, if shareholder action is not required) and the shareholders of the other constituent corporation (or its board of directors if

11

shareholder action is not required) have approved a definitive agreement to merge or consolidate the Company with or into such other corporation, other than, in either case, a merger or consolidation of the Company in which holders of shares of the Company’s Common Stock immediately prior to the merger or consolidation will have at least a majority of the ownership of common stock of the surviving corporation (and, if one class of common stock is not the only class of voting securities entitled to vote on the election of directors of the surviving corporation, a majority of the voting power of the surviving corporation’s voting securities) immediately after the merger or consolidation, which common stock (and, if applicable, voting securities) is to be held in the same proportion as such holders’ ownership of Common Stock of the Company immediately before the merger or consolidation, or (iv) the date any entity, person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, other than the Company or any of its subsidiaries, any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or Anne-Marie Corner, Daniel Malamud and Alex Adler, in the aggregate, (directly or indirectly, either individually or together with any member of their immediate family or a trust for the benefit of them or any member of their immediate family) shall no longer be the beneficial owner of, or have obtained voting control over, at least fifteen percent (15%) of the outstanding shares of the Company’s Common Stock.

10.           Adjustments on Changes in Capitalization. The aggregate number of Shares and class of Shares as to which Options may be granted hereunder, the number and class or classes of Shares covered by each outstanding Option and the Option Price thereof shall be appropriately adjusted in the event of a stock dividend, stock split, recapitalization or other change in the number or class of issued and outstanding equity securities of the Company resulting from a subdivision or consolidation of the Common Stock and/or, if appropriate, other

12

outstanding equity securities or a recapitalization or other capital adjustment (not including the issuance of Common Stock on the conversion of other securities of the Company which are convertible into Common Stock) affecting the Common Stock which is effected without receipt of consideration by the Company. The Committee shall have authority to determine the adjustments to be made under this Section, and any such determination by the Committee shall be final, binding and conclusive.

11.           Amendment of the Plan. The Board of Directors of the Company may amend the Plan from time to time in such manner as it may deem advisable. Nevertheless, the Board of Directors of the Company may not change the class of individuals eligible to receive an ISO or increase the maximum number of shares as to which Options may be granted without obtaining approval, within twelve months before or after such action, by vote of a majority of the votes cast at a duly called meeting of the shareholders at which a quorum representing a majority

of all outstanding voting stock of the Company is, either in person or by proxy, present and voting on the matter, or by a method and in a degree that would be treated as adequate under applicable state law in the case of an action requiring shareholder approval. No amendment to the Plan shall adversely affect any outstanding Option, however, without the consent of the Optionee.

12.           No Commitment to Retain. The grant of an Option pursuant to the Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any Affiliate to retain the Optionee in the employ of the Company or an Affiliate or as a member of the Company’s Board of Directors or in any other capacity.

13.           Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of an Option, the Company shall have the right to (a) require the recipient to remit or otherwise make available to the Company an

13

amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares or (b) take whatever other action it deems necessary to protect its interests with respect to tax liabilities. The Company’s obligation to make any delivery or transfer of Shares shall be conditioned on the Optionee’s compliance, to the Company’s satisfaction, with any withholding requirement.

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EX-10.3

Exhibit 10.3

CELLEGY PHARMACEUTICALS, INC.

STOCK OPTION ASSUMPTION AGREEMENT

(Non-Plan Options)

Dear Anne-Marie Corner:

As you know, on October 7, 2004, Cellegy Pharmaceuticals, Inc. (“Cellegy”) and Biosyn, Inc. (“Biosyn”) entered into an Agreement and Plan of Shares Exchange (the “Exchange Agreement”) pursuant to which all the outstanding shares of Biosyn capital stock will be exchanged for shares of Cellegy common stock and all outstanding options and warrants to purchase Biosyn common stock will be assumed by Cellegy (the “Exchange”).  The number of shares of Cellegy common stock into which each share of Biosyn common stock will be converted is based on the exchange ratio for the Biosyn common stock, as defined in the Exchange Agreement (the “Exchange Ratio”).  The closing of the transactions contemplated by the Exchange Agreement is contemplated to occur on or about October 22, 2004 (“Closing Date”).

You hold one or more outstanding options to purchase Biosyn common stock.  Pursuant to the Exchange Agreement, Cellegy will assume as of the Closing Date all obligations of Biosyn under your outstanding option (or options).  This Stock Option Assumption Agreement (the “Agreement”) evidences the terms of Cellegy’s assumption of one or more options (the “Biosyn Non-Plan Options”) to purchase Biosyn common stock granted to you other than pursuant to Biosyn’s 1999 Stock Option Plan (the “Plan”), which Biosyn Non-Plan Options are documented by one or more stock option agreements entered into by and between you and Biosyn or by resolutions of the Board of Directors of Biosyn (collectively, the “Option Agreements”).  The table below lists the Biosyn Non-Plan Options that you currently hold:

	BIOSYN NON-PLAN OPTION
Grant Date		Option Expiration Date	No. of Shares of Biosyn Common Stock	Exercise Price per share
6/1/95		5/31/05	60,000	$	0.01
6/1/96		5/31/06	12,000	$	0.01
12/31/97		12/30/07	10,000	$	0.01
12/31/98		12/30/08	10,000	$	3.00
12/31/98		12/30/08	20,000	$	0.01

After the Exchange, your Biosyn Non-Plan Options will no longer give you the right to purchase Biosyn Common Stock.  Instead, your Biosyn Non-Plan Options will give you the right to purchase shares of Cellegy common stock, with the number of shares of Cellegy common stock calculated based on the Exchange Ratio for the Biosyn Common Stock as provided in the Exchange Agreement and the exercise price per share proportionately adjusted.  As described

below, Cellegy will separately provide you with information regarding the number of Cellegy shares underlying your Biosyn Options.

The grant date and expiration date of your assumed Biosyn Non-Plan Options will remain the same after the Exchange as set forth in the Option Agreements, but the number of shares subject to your assumed Biosyn Non-Plan Options and the exercise price per share will be adjusted to reflect the effect of the Exchange as described in Section 1.6(b) of the Exchange Agreement.  In addition, by signing below, you agree that your Biosyn Non-Plan Options will be governed by the change of control provisions set forth in Section 9 (Change of Control) of the Biosyn 1999 Stock Option Plan (the “Plan”) after the Exchange.  In addition, if you are a Biosyn employee, then the provisions of the Plan governing the exercisability of your Biosyn Non-Plan Options following a termination of employment will apply to your Biosyn Non-Plan Options.  The other provisions of your Biosyn Non-Plan Options will remain the same as set forth in the Option Agreements, and the provisions of the Option Agreements (except as expressly modified by this Agreement and the Exchange Agreement) will govern and control your rights to purchase shares of Cellegy common stock.

Unless the context otherwise requires, after the Exchange any references in the Plan and the Option Agreements to: (i) the “Company” or the “Corporation” means Cellegy, (ii) “Stock,” “Common Stock” or Shares” means shares of Cellegy Common Stock, (iii) the “Board of Directors” or the “Board” means the Board of Directors of Cellegy and (iv) the “Committee” means the Compensation Committee of the Board of Directors of Cellegy (or any other committee that the Board may designate as administrator of the Plan).  All provisions references in the Option Agreements relating to your status as an employee of Biosyn will, after the Exchange, refer to your status as an employee of Cellegy or any present or future Cellegy subsidiary.

Notwithstanding any other provision of this Agreement: (i) your assumed Biosyn Non-Plan Options shall not form any part of any contract of employment between Cellegy, or any subsidiary, and you, and it shall not confer on you any legal or equitable rights (other than those constituting your assumed Biosyn Non-Plan Options themselves) against Cellegy or any subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against Cellegy or any subsidiary; and (ii) your benefits under your assumed Biosyn Non-Plan Options shall not form any part of your wages or remuneration or count as pay or remuneration for pension fund or other purposes.

After the Closing Date, Cellegy will send to you a notice that will set forth the exact number of shares of Cellegy common stock that will underlie your Biosyn Non-Plan Options as a result of the Exchange and the new per share exercise price of the Biosyn Non-Plan Options.  The notice will be accompanied by a form of Exercise Notice that you will be able to use in order to exercise the Biosyn Non-Plan Options after the Exchange.

Nothing in this Agreement or the Option Agreements interferes in any way with your right, Biosyn’s right or Cellegy’s right, which rights are expressly reserved, to terminate your employment (if you are employed by Biosyn or Cellegy) at any time for any reason.  Any future options, if any, you may receive from Cellegy will be governed by the terms of the Cellegy’s

equity incentive plans, and such terms may be different from the terms of your assumed Biosyn Non-Plan Options.

[Remainder of page intentionally left blank]

Please sign and date this Agreement on the following page and return it promptly to Cellegy at the following address:

Cellegy Pharmaceuticals, Inc.

349 Oyster Point Boulevard, Suite 200

South San Francisco, CA 94080

Attn:  A. Richard Juelis

CELLEGY PHARMACEUTICALS, INC.

/s/ A. Richard Juelis

A. Richard Juelis,

Chief Financial Officer

 [ACKNOWLEDGMENT PAGE FOLLOWS]

ACKNOWLEDGMENT

The undersigned acknowledges receipt of the foregoing Stock Option Assumption Agreement and understands and agrees that all rights and liabilities with respect to the assumed Biosyn Non-Plan Options listed on the table above will be assumed by Cellegy on the Closing Date and are as set forth in the Option Agreements for such assumed Biosyn Non-Plan Options and this Stock Option Assumption Agreement (and the Plan to the extent set forth in this Agreement).

DATED:  October 20, 2004

/s/ Anne-Marie Corner

Anne-Marie Corner

Mailing Address:

EX-10.4

Exhibit 10.4

CELLEGY PHARMACEUTICALS, INC.

STOCK OPTION ASSUMPTION AGREEMENT

(1999 Stock Option Plan)

Dear Anne-Marie Corner:

As you know, on October 7, 2004, Cellegy Pharmaceuticals, Inc. (“Cellegy”) and Biosyn, Inc. (“Biosyn”) entered into an Agreement and Plan of Shares Exchange (the “Exchange Agreement”) pursuant to which all the outstanding shares of Biosyn capital stock will be exchanged for shares of Cellegy common stock and all outstanding options and warrants to purchase Biosyn common stock will be assumed by Cellegy (the “Exchange”).  The number of shares of Cellegy common stock into which each share of Biosyn common stock will be converted is based on the exchange ratio for the Biosyn common stock, as defined in the Exchange Agreement (the “Exchange Ratio”).  The closing of the transactions contemplated by the Exchange Agreement is contemplated to occur on or about October 22, 2004 (“Closing Date”).

You hold one or more outstanding options to purchase Biosyn common stock granted to you under Biosyn’s 1999 Stock Option Plan (the “Plan”).  Pursuant to the Exchange Agreement, Cellegy will assume all obligations of Biosyn under your outstanding option (or options) on the Closing Date.  This Stock Option Assumption Agreement (the “Agreement”) evidences the terms of Cellegy’s assumption of the option(s) to purchase Biosyn common stock granted to you under the Plan (the “Biosyn Options”), which Biosyn Options are documented by one or more stock option agreements entered into between you and Biosyn (the “Option Agreements”).

The table below lists the Biosyn Option(s) that you currently hold:

	BIOSYN OPTION
Grant Date		Option Expiration Date	No. of Shares of Biosyn Common Stock	Exercise Price per share
1/1/00		12/31/09	15,000	$	2.50
1/1/01		12/31/10	15,000	$	3.00
2/20/02		2/19/12	20,000	$	1.50
1/6/03		1/5/13	50,000	$	.05
1/5/04		1/4/14	40,000	$	.05

After the Exchange, your Biosyn Options will no longer give you the right to purchase Biosyn Common Stock.  Instead, your Biosyn Options will give you the right to purchase shares of Cellegy common stock, with the number of shares of Cellegy common stock calculated based on the Exchange Ratio for the Biosyn common stock as provided in the Exchange Agreement,

and the exercise price per share proportionately adjusted.  As described further below, Cellegy will separately provide you information regarding the number of Cellegy shares underlying your Biosyn Options.

The grant date and expiration date of your assumed Biosyn Option(s) will remain the same after the Exchange as set forth in your Option Agreements, but the number of shares subject to your assumed Biosyn Options and the exercise price per share will be adjusted to reflect the effect of the Exchange as described in Section 1.6(b) of the Exchange Agreement.  The other provisions of the Option Agreements (except as expressly modified by this Agreement and the Exchange Agreement) will govern and control your rights to purchase shares of Cellegy common stock.  Upon termination of your employment with Cellegy, you will have the limited post-termination exercise period specified in the Plan for your assumed Biosyn Options, generally three months (except in the case of death or permanent disability, in which case such period is twelve months), after which time your assumed Biosyn Options will expire and NOT be exercisable for Cellegy common stock.

Unless the context otherwise requires, after the Exchange any references in the Plan and the Option Agreements to: (i) the “Company” or the “Corporation” means Cellegy, (ii) “Stock,” “Common Stock” or Shares” means shares of Cellegy Common Stock, (iii) the “Board of Directors” or the “Board” means the Board of Directors of Cellegy and (iv) the “Committee” means the Compensation Committee of the Board of Directors of Cellegy (or any other committee that the Board may designate as administrator of the Plan).  All references in the Option Agreements and the Plan relating to your status as an employee of Biosyn will, after the Exchange, refer to your status as an employee of Cellegy or any present or future Cellegy subsidiary.

Notwithstanding any other provision of this Agreement: (i) your assumed Biosyn Options shall not form any part of any contract of employment between Cellegy, or any subsidiary, and you, and it shall not confer on you any legal or equitable rights (other than those constituting your assumed Biosyn Options themselves) against Cellegy or any subsidiary, directly or indirectly, or give rise to any cause of action in law or in equity against Cellegy or any subsidiary; and  (ii) your benefits under your assumed Biosyn Options shall not form any part of your wages or remuneration or count as pay or remuneration for pension fund or other purposes.

After the Closing Date, Cellegy will send to you a notice that will set forth the exact number of shares of Cellegy common stock that will underlie your Biosyn Options as a result of the Exchange and the new per share exercise price of the Biosyn Options.  The notice will be accompanied by a form of Exercise Notice that you will be able to use in order to exercise the Biosyn Options after the Exchange.

Nothing in this Agreement or the Option Agreements interferes in any way with your right, Biosyn’s right or Cellegy’s right, which rights are expressly reserved, to terminate your employment (if you are employed by Biosyn or Cellegy) at any time for any reason.  Any future options, if any, you may receive from Cellegy will be governed by the terms of the Cellegy equity incentive plan under which such options are granted, and such terms may be different from the terms of your assumed Biosyn Options.

[Remainder of page intentionally left blank]

Please sign and date this Agreement on the following page and return it promptly to Cellegy at the following address:

Cellegy Pharmaceuticals, Inc.

349 Oyster Point Boulevard, Suite 200

South San Francisco, CA 94080

Attn: A. Richard Juelis

CELLEGY PHARMACEUTICALS, INC.

/s/ A. Richard Juelis

A. Richard Juelis,

Chief Financial Officer

 [ACKNOWLEDGMENT PAGE FOLLOWS]

ACKNOWLEDGMENT

The undersigned acknowledges receipt of the foregoing Stock Option Assumption Agreement and understands and agrees that all rights and liabilities with respect to the assumed Biosyn Options listed on the table above will be assumed by Cellegy on the Closing Date and are as set forth in the Option Agreements for such assumed Biosyn Options, the Plan and this Stock Option Assumption Agreement.

DATED:  October 20, 2004

/s/ Anne-Marie Corner

Anne-Marie Corner

Mailing Address:

EX-10.5

Exhibit 10.5

CELLEGY PHARMACEUTICALS, INC.

NOTICE OF ASSUMPTION OF BIOSYN OPTIONS

Dear Anne-Marie Corner:

As you know, on October 22, 2004, Cellegy Pharmaceuticals, Inc. (“Cellegy”) acquired all the outstanding shares of capital stock of Biosyn, Inc. (“Biosyn”) and assumed all outstanding options and warrants to purchase Biosyn common stock in an exchange transaction (the “Exchange”).  This letter confirms the information set forth in the Stock Option Assumption Agreement (“Option Assumption Agreement”) that was previously sent to you regarding one or more outstanding options to purchase Biosyn common stock (“Biosyn Options”) held by you prior to the Exchange.  As a result of the Exchange, your Biosyn Options are no longer exercisable for Biosyn common stock.  Instead, your Biosyn Options are exercisable for shares of Cellegy common stock under the terms set forth in the Option Assumption Agreement.

The tables below summarize your Biosyn Options immediately before and after the Exchange.  These options may have been granted to you pursuant to Biosyn’s 1999 Stock Option Plan (the “Plan”) or they may have been granted to you other than pursuant to the Plan.

		BIOSYN PLAN OPTION					ASSUMED BIOSYN OPTION
Grant Date	Option Expiration Date		No. of Shares of Biosyn Common Stock	Exercise Price per share		No. of Shares of Cellegy Common Stock		Exercise Price Per Share
1/1/00	12/31/09		15,000	$	2.50	2,570		$	14.60
1/1/01	12/31/10		15,000	$	3.00	2,570		$	17.52
2/20/02	2/19/12		20,000	$	1.50	3,426		$	8.76
1/6/03	1/5/13		50,000	$	.05	8,564		$	0.29
1/5/04	1/4/14		40,000	$	.05	6,851		$	0.29
		BIOSYN NON-PLAN OPTION					ASSUMED BIOSYN OPTION
Grant Date	Option Expiration Date		No. of Shares of Biosyn Common Stock	Exercise Price per share		No. of Shares of Cellegy Common Stock		Exercise Price Per Share
6/1/95	5/31/05		60,000	$	0.01	10,277		$	0.06
6/1/96	5/31/06		12,000	$	0.01	2,056		$	0.06
12/31/97	12/30/07		10,000	$	0.01	1,713		$	0.06
12/31/98	12/30/08		10,000	$	3.00	1,713		$	17.52
12/31/98	12/30/08		20,000	$	0.01	3,426		$	0.06

To exercise your assumed Biosyn Option(s), you must send to Cellegy at the address listed on the attached Exercise Notice (i) an executed and completed Exercise Notice for each Biosyn Option that you intend to exercise and (ii) the full purchase price of the Cellegy common stock that you wish to acquire upon exercise of the Biosyn Option in accordance with the Exercise Notice.

                Please note that pursuant to the terms of the Exchange, you will not be able to sell any shares of Cellegy common stock that you acquire upon exercise of your assumed Biosyn Options until January 20, 2005.

                If you have any questions about your assumed Biosyn Option(s), please call Virginia Alsup at Cellegy at 650-616-2200.

CELLEGY PHARMACEUTICALS, INC.

/s/ A. Richard Juelis

A. Richard Juelis,

Chief Financial Officer

EXHIBIT A

NOTICE OF EXERCISE

(For Employees of Cellegy Pharmaceuticals, Inc.)

CELLEGY PHARMACEUTICALS, INC.

Address:        349 Oyster Point Boulevard, Suite 200

                        South San Francisco, CA 94080

Attention: Corporate Secretary

I hereby elect to purchase the number of shares of Common Stock of CELLEGY PHARMACEUTICALS, INC. (the “Company”) as set forth below:

Option Holder:	Number of Shares Purchased:
Social Security Number:	Purchase Price per Share:
Address:	Aggregate Purchase Price:
	Date of Option Agreement:

Type of Option:

o Incentive Stock Option

o Non-qualified Stock Option

1.Delivery of Purchase Price.  Option Holder hereby delivers to the Company the Aggregate Purchase Price, to the extent permitted in the Stock Option Agreement (the “Option Agreement”) as follows (check as applicable and complete):

oin cash (by check) in the amount of $                         , receipt of which is acknowledged by the Company;

othrough a “same-day-sale” commitment, delivered herewith, from Option Holder and the NASD Dealer named therein, in the amount of $                             .

2.Lock-Up; Legend.  Option Holder hereby agrees that the Shares are subject to a lock-up agreement between the Company and Option Holder and that Option Holder may not sell or otherwise transfer, or enter into any agreement to sell or transfer, or enter into any other economic arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Shares (other than to donees of Option Holder who agree to be similarly bound) prior to January 20, 2005.  Option Holder hereby agrees that the Company may place appropriate restrictive legends on any stock certificates representing the Shares and may impose stop-transfer instructions with respect to the Shares to effect the foregoing.

3.Tax Consequences.  OPTION HOLDER UNDERSTANDS THAT OPTION HOLDER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTION

HOLDER’S PURCHASE OR DISPOSITION OF THE SHARES.  OPTION HOLDER REPRESENTS THAT OPTION HOLDER HAS CONSULTED WITH ANY TAX CONSULTANT(S) OPTION HOLDER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT OPTION HOLDER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVISE.

4.Entire Agreement.  The Option Agreement and the Stock Option Assumption Agreement that was previously delivered to Option Holder in connection with the Company’s acquisition of Biosyn, Inc. (“Option Assumption Agreement”) are incorporated herein by reference.  This Exercise Notice, the Option Agreement and the Option Assumption Agreement constitute the entire agreement and understanding of the parties and supersede in their entirety all prior understandings and agreements of the Company and Option Holder with respect to the subject matter hereof.

Date Signature of Option Holder

Spousal Consent

I acknowledge that I have read the foregoing Notice of Exercise (the “Notice”) and that I know its contents.  I hereby consent to and approve all of the provisions of the Notice, and agree that the shares of the Common Stock of Cellegy Pharmaceuticals, Inc. purchased thereunder (the “Shares”) and any interest I may have in such Shares are subject to all the provisions of the Notice.  I will take no action at any time to hinder operation of the Agreement on these Shares or any interest I may have in or to them.

Date	Signature of Optionee’s Spouse
	Spouse’s Name typed or printed
	Optionee’s Name typed or printed

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, K. Michael Forrest, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Cellegy Pharmaceuticals, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and (15d-15(e)) for the registrant and we have:

a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)     disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2004	By:	/s/ K. Michael Forrest
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, A. Richard Juelis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cellegy Pharmaceuticals, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and (15d-15(e)) for the registrant and we have:

a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially effected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)     all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2004	By:	/s/ A. Richard Juelis
		Vice President, Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Cellegy Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the three months ended September 30, 2004, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), K. Michael Forrest, as President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

i.The Report fully complied with the requirements of sections 13(a) or 15(d) of the Securities  Exchange Act of 1934; and

ii.The information contained in the Report fairly presents, in all material respects, the financial Condition and results of operations of the Company

By:	/s/ K. Michael Forrest
	K. Michael Forrest
	President and Chief Executive Officer
	Date: November 12, 2004

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Cellegy Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the three months ended September 30, 2004, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), A. Richard Juelis, as Vice President, Finance and Chief Financial  Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

i.The Report fully complied with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

ii.The information contained in the Report fairly presents, in all material respects, the financial Condition and results of operations of the Company

By:	/s/ A. Richard Juelis
	A. Richard Juelis
	Vice President, Finance and Chief Financial Officer
	Date: November 12, 2004